UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-21566

Name of Fund: BlackRock Floating Rate Income Trust (BGT)

Fund Address:    100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Floating Rate Income Trust, 55 East 52^nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

Date of fiscal year end: 10/31/2018

Date of reporting period: 10/31/2018

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Item 1 – Report to Stockholders

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OCTOBER 31, 2018

 

ANNUAL REPORT

 

BlackRock Credit Allocation Income Trust (BTZ)

BlackRock Floating Rate Income Trust (BGT)

BlackRock Multi-Sector Income Trust (BIT)

 

Not FDIC Insured • May Lose Value • No Bank Guarantee

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2		THIS PAGE IS NOT PART OF YOUR FUND REPORT

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Table of Contents

 

		Page
The Markets in Review			2
Annual Report:
Trust Summaries			4
The Benefits and Risks of Leveraging			13
Derivative Financial Instruments			13
Financial Statements:
Schedules of Investments			14
Statements of Assets and Liabilities			83
Statements of Operations			85
Statements of Changes in Net Assets			86
Statements of Cash Flows			88
Financial Highlights			90
Notes to Financial Statements			93
Report of Independent Registered Public Accounting Firm			107
Important Tax Information			107
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement			108
Automatic Dividend Reinvestment Plan			112
Trustee and Officer Information			113
Additional Information			116
Glossary of Terms Used in this Report			118

 

 

 

 

			3

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Trust Summary  as of October 31, 2018		BlackRock Credit Allocation Income Trust

 

Investment Objective

BlackRock Credit Allocation Income Trust’s (BTZ) (the “Trust”) investment objective is to provide current income, current gains and capital appreciation. The Trust seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in credit-related securities, including, but not limited to, investment grade corporate bonds, high yield bonds (commonly referred to as “junk” bonds), bank loans, preferred securities or convertible bonds or derivatives with economic characteristics similar to these credit-related securities. The Trust may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Trust’s investment objective will be achieved.

Trust Information

 

Symbol on New York Stock Exchange (“NYSE”)		BTZ
Initial Offering Date		December 27, 2006
Current Distribution Rate on Closing Market Price as of October 31, 2018 ($11.72)(a)		6.86%
Current Monthly Distribution per Common Share(b)		$0.0670
Current Annualized Distribution per Common Share(b)		$0.8040
Economic Leverage as of October 31, 2018(c)		33%

 

(a)

Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate consists of income, net realized gains and/or a return of capital. Past performance does not guarantee future results.

(b)

The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain.

(c)

Represents reverse repurchase agreements as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to any borrowings) minus the sum of its liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 13.

Market Price and Net Asset Value Per Share Summary

 

		10/31/18				10/31/17				Change				High				Low
Market Price		$	11.72			$	13.36				(12.28	)%		$	13.51			$	11.65
Net Asset Value			13.72				14.88				(7.80	)			14.92				13.71

Market Price and Net Asset Value History For the Past Five Years

 

 

 

4		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Trust Summary  as of October 31, 2018 (continued)		BlackRock Credit Allocation Income Trust

 

Performance and Portfolio Management Commentary

Returns for the period ended October 31, 2018 were as follows:

 

						Average Annual Total Returns
						1 Year				3 Years				5 Years
Trust at NAV(a)(b)							(1.72	)%			5.35	%			5.30	%
Trust at Market Price(a)(b)							(6.49	)			4.53				5.01
Reference Benchmark(c)							(1.78	)			3.82				3.69
Bloomberg Barclays U.S. Credit Index(d)							(2.81	)			2.34				2.81
Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index(e)							0.98				6.60				4.69
Bloomberg Barclays USD Capital Securities Index(f)							(3.29	)			3.35				4.32

 

(a)

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Trust’s use of leverage.

(b)

The Trust’s discount to NAV widened during the period, which accounts for the difference between performance based on market price and performance based on NAV.

(c)

The Reference Benchmark is comprised of the Bloomberg Barclays U.S. Credit Index (50.36%), the Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index (29.93%), and the Bloomberg Barclays USD Capital Securities Index (19.71%).

(d)

This unmanaged index measures the investment grade, U.S. dollar-denominated, fixed-rate, taxable corporate and government-related bond markets.

(e)

An unmanaged index comprised of issues that meet the following criteria: at least $150 million par value outstanding; maximum credit rating of Ba1; at least one year to maturity; and no issuer represents more than 2% of the index.

(f)

This unmanaged index tracks fixed-rate, investment grade capital securities denominated in USD.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Past performance is not indicative of future results.

BTZ is presenting the Reference Benchmark to accompany trust performance. The Reference Benchmark is presented for informational purposes only, as the Trust is actively managed and does not seek to track or replicate the performance of the Reference Benchmark or any other index. The portfolio investments of the Trust may differ substantially from the securities that comprise the indices within the Reference Benchmark, which may cause the Trust’s performance to differ materially from that of the Reference Benchmark. The Trust employs leverage as part of its investment strategy, which may change over time at the discretion of BlackRock Advisors, LLC (the “Manager”) as market and other conditions warrant. In contrast, the Reference Benchmark is not adjusted for leverage. Therefore, leverage generally may result in the Trust outperforming the Reference Benchmark in rising markets and underperforming in declining markets. The Board considers additional factors to evaluate the Trust’s performance, such as the performance of the Trust relative to a peer group of funds, a leverage-adjusted benchmark and/or other information provided by the Manager.

More information about the Trust’s historical performance can be found in the “Closed End Funds” section of http://www.blackrock.com.

The following discussion relates to the Trust’s absolute performance based on NAV:

What factors influenced performance?

The Trust’s small allocation to emerging market-related debt had a negative impact on performance as rising interest rates, a strengthening U.S. dollar and idiosyncratic events weighed on the asset class. Additionally, the Trust’s allocations to European investment grade and high yield corporate debt detracted, with exposure to the banking sector weighing most heavily on return.

The Trust’s allocation to U.S. high yield corporate bonds helped performance as a positive technical backdrop supported the asset class amid volatility in other credit markets. An allocation to collateralized loan obligations (“CLOs”) also added to performance as the asset class benefited from rising short-term rates and investor appetite for floating rate debt. Positioning with respect to overall portfolio duration (and corresponding sensitivity to interest rate changes) was positive for performance as well, as the Trust had a relatively short duration in a period of rising rates.

Describe recent portfolio activity.

Over the period, the Trust’s out-of-benchmark exposure to CLOs was increased in order to benefit from demand for floating rate products in a rising rate environment. Additionally, the Trust increased its exposure to U.S. high yield corporate bonds over the period with an emphasis on the technology and energy sectors, as strong credit fundamentals and an improved technical backdrop have supported the asset class.

The Trust utilized derivatives including financial futures over the period in order to manage interest rate risk in the portfolio. The use of derivatives had a positive impact on performance.

Describe portfolio positioning at period end.

The Trust was positioned with a constructive view on credit as growth remained strong and corporate fundamentals remained healthy, although increased downside risks led the investment adviser to adopt a slightly more cautious stance. The Trust maintained an underweight position with respect to duration (and interest rate sensitivity) on the view that rates could continue to rise, along with an allocation to CLOs, which benefit from rising short-term rates. The largest overweight positions were to banks within financials and to midstream energy and telecommunication services companies within industrials. The Trust was underweight in sectors viewed as facing structural challenges such as retailers and life insurance companies.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

 

TRUST SUMMARY			5

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Trust Summary  as of October 31, 2018 (continued)		BlackRock Credit Allocation Income Trust

 

Overview of the Trust’s Total Investments

 

 

 

6		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Trust Summary  as of October 31, 2018		BlackRock Floating Rate Income Trust

 

Investment Objective

BlackRock Floating Rate Income Trust’s (BGT) (the “Trust”) primary investment objective is to provide a high level of current income. The Trust’s secondary investment objective is to seek the preservation of capital to the extent consistent with its primary objective of high current income. The Trust seeks to achieve its investment objectives by investing primarily, under normal conditions, at least 80% of its assets in floating and variable rate instruments of U.S. and non-U.S. issuers, including a substantial portion of its assets in global floating and variable rate securities including senior secured floating rate loans made to corporate and other business entities. Under normal market conditions, the Trust expects that the average effective duration of its portfolio will be no more than 1.5 years. The Trust may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Trust’s investment objectives will be achieved.

Trust Information

 

Symbol on NYSE		BGT
Initial Offering Date		August 30, 2004
Current Distribution Rate on Closing Market Price as of October 31, 2018 ($12.72)(a)		5.83%
Current Monthly Distribution per Common Share(b)		$0.0618
Current Annualized Distribution per Common Share(b)		$0.7416
Economic Leverage as of October 31, 2018(c)		30%

 

(a)

Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate consists of income, net realized gains and/or a return of capital. Past performance does not guarantee future results.

(b)

The distribution rate is not constant and is subject to change.

(c)

Represents bank borrowings outstanding as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to any borrowings) minus the sum of its liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 13.

Market Price and Net Asset Value Per Share Summary

 

		10/31/18				10/31/17				Change				High				Low
Market Price		$	12.72			$	14.31				(11.11	)%		$	14.32			$	12.72
Net Asset Value			14.33				14.49				(1.10	)			14.54				14.29

Market Price and Net Asset Value History For the Past Five Years

 

 

 

TRUST SUMMARY			7

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Trust Summary  as of October 31, 2018 (continued)		BlackRock Floating Rate Income Trust

 

Performance and Portfolio Management Commentary

Returns for the period ended October 31, 2018 were as follows:

 

						Average Annual Total Returns
						1 Year				3 Years				5 Years
Trust at NAV(a)(b)							4.25	%			5.87	%			5.15	%
Trust at Market Price(a)(b)							(6.30	)			5.37				3.63
S&P/LSTA Leveraged Loan Index(c)							4.54				5.37				3.97

 

(a)

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Trust’s use of leverage.

(b)

The Trust’s discount to NAV widened during the period, which accounts for the difference between performance based on market price and performance based on NAV.

(c)

This unmanaged market value-weighted index (the “Reference Benchmark”) is designed to measure the performance of the U.S. leveraged loan market based upon market weightings, spreads and interest payments.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Past performance is not indicative of future results.

BGT is presenting the Reference Benchmark to accompany trust performance. The Reference Benchmark is presented for informational purposes only, as the Trust is actively managed and does not seek to track or replicate the performance of the Reference Benchmark or any other index. The portfolio investments of the Trust may differ substantially from the securities that comprise the indices within the Reference Benchmark, which may cause the Trust’s performance to differ materially from that of the Reference Benchmark. The Trust employs leverage as part of its investment strategy, which may change over time at the discretion of BlackRock Advisors, LLC (the “Manager”) as market and other conditions warrant. In contrast, the Reference Benchmark is not adjusted for leverage. Therefore, leverage generally may result in the Trust outperforming the Reference Benchmark in rising markets and underperforming in declining markets. The Board considers additional factors to evaluate the Trust’s performance, such as the performance of the Trust relative to a peer group of funds, a leverage-adjusted benchmark and/or other information provided by the Manager.

More information about the Trust’s historical performance can be found in the “Closed End Funds” section of http://www.blackrock.com.

The following discussion relates to the Trust’s absolute performance based on NAV:

What factors influenced performance?

From a sector perspective, the technology, health care and consumer cyclical services sectors were the largest contributors to the Trust’s performance. By credit rating, B-rated positions were the largest contributors to performance, followed by BB-rated and CCC-rated positions. In terms of asset allocation, contributions to performance were led by floating rate loan interests (“bank loans”), followed by high yield bonds and collateralized loan obligations (“CLOs”).

On the downside, at the sector level, wireless, banking and integrated energy holdings were the largest detractors from the Trust’s performance. There were no detractors from a credit rating perspective. Small positions in high yield credit default swaps and bank loan index products detracted slightly as well.

Describe recent portfolio activity.

The majority of the Trust was invested in B-rated bank loans over the 12-month period, with BB-rated names as the second largest allocation. Over the period, the Trust decreased its position in BB-rated loans in favor of B-rated positions. Additionally, the Trust trimmed its small CCC-rated allocation. On a sector basis, the Trust reduced its allocation to the communications space, particularly with respect to cable & satellite and wireless companies. The Trust also decreased its allocation to the gaming sector and continued to avoid cyclical sectors such as retailers and leisure. The Trust reduced its high yield bond exposure over the period and increased its allocation to CLOs.

Describe portfolio positioning at period end.

At period end, the Trust held the majority of its portfolio in floating rate bank loans, along with modest allocations to high yield bonds and CLOs. The Trust maintained its highest concentration in B-rated loans of select issuers, while limiting exposure to both higher quality loans with less-compelling risk/reward profiles and lower-rated loans with more equity-like profiles and greater downside risk should credit sentiment weaken. From a sector perspective, the Trust’s largest overweight positions were within health care, technology and pharmaceuticals issuers. By contrast, the Trust was underweight in the broad consumer cyclicals space, particularly to retailers, automotive and leisure issuers. Within energy, the Trust was focused on higher-quality issuers within the independent energy segment as opposed to the potentially more volatile oil field services space. The Trust remained focused on industries and companies with stable business profiles and consistent cash flows, while avoiding areas of the market with secular concerns and/or deteriorating fundamental trends.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

 

8		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Trust Summary  as of October 31, 2018 (continued)		BlackRock Floating Rate Income Trust

 

Overview of the Trust’s Total Investments

 

 

 

TRUST SUMMARY			9

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Trust Summary  as of October 31, 2018		BlackRock Multi-Sector Income Trust

 

Investment Objective

BlackRock Multi-Sector Income Trust’s (BIT) (the “Trust”) primary investment objective is to seek high current income, with a secondary objective of capital appreciation. The Trust seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its assets in loan and debt instruments and other investments with similar economic characteristics. The Trust may invest directly in such securities or synthetically through the use of derivatives. Additionally, as part of the Trust’s investments in loans, the Trust may make loans directly to borrowers either as a sole lender or by acting as a member of a syndicate of original lenders.

No assurance can be given that the Trust’s investment objectives will be achieved.

Trust Information

 

Symbol on NYSE		BIT
Initial Offering Date		February 27, 2013
Current Distribution Rate on Closing Market Price as of October 31, 2018 ($16.25)(a)		8.62%
Current Monthly Distribution per Common Share(b)		$0.1167
Current Annualized Distribution per Common Share(b)		$1.4004
Economic Leverage as of October 31, 2018(c)		35%

 

(a)

Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate consists of income, net realized gains and/or a return of capital. Past performance does not guarantee future results.

(b)

The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain.

(c)

Represents reverse repurchase agreements as a percentage of total managed assets, which is the total assets of the Trust (including any assets attributable to any borrowings) minus the sum of its liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Trust, please see The Benefits and Risks of Leveraging on page 13.

Market Price and Net Asset Value Per Share Summary

 

		10/31/18				10/31/17				Change				High				Low
Market Price		$	16.25			$	18.55				(12.40	)%		$	18.59			$	16.18
Net Asset Value			18.79				20.07				(6.38	)			20.09				18.68

Market Price and Net Asset Value History For the Past Five Years

 

 

 

10		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Trust Summary  as of October 31, 2018 (continued)		BlackRock Multi-Sector Income Trust

 

Performance and Portfolio Management Commentary

Returns for the period ended October 31, 2018 were as follows:

 

						Average Annual Total Returns
						1 Year				3 Years				5 Years
Trust at NAV(a)(b)							2.18	%			9.95	%			9.31	%
Trust at Market Price(a)(b)							(4.40	)			9.93				8.46
Lipper General Bond Funds at NAV(c)							3.21				7.21				6.07
Lipper General Bond Funds at Market Price(c)							(0.36	)			9.10				6.67

 

(a)

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Trust’s use of leverage.

(b)

The Trust’s discount to NAV widened during the period, which accounts for the difference between performance based on market price and performance based on NAV.

(c)

Average return. Returns reflect reinvestment of dividends and/or distributions at NAV on the ex-dividend date as calculated by Lipper. Historical performance shown is calculated based on the composition of the Lipper General Bond Fund category at the time of preparation of this report to shareholders.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Past performance is not indicative of future results.

More information about the Trust’s historical performance can be found in the “Closed End Funds” section of http://www.blackrock.com.

The following discussion relates to the Trust’s absolute performance based on NAV:

What factors influenced performance?

The Trust’s positions in asset-backed securities (“ABS”), senior loans, commercial mortgage-backed securities (“CMBS”), and non-agency mortgage-backed securities (“MBS”) were the largest contributors to Trust performance for the period. Allocations to collateralized loan obligations and high yield corporate issues also contributed.

The Trust’s allocation to sovereign plus securities represented the largest detractor from performance during the period. Holdings in investment grade corporate securities, capital securities and emerging market issues also detracted from returns.

For the period, the Trust held derivatives including interest rate swaps and futures as part of its investment strategy. Interest rate derivatives were utilized to manage duration (sensitivity to interest rates) and to express views on swap spreads. The use of these derivative securities had a positive impact on performance during the period.

Describe recent portfolio activity.

At the start of the 12-month period, the Trust was positioned to benefit from a generally supportive market environment for risk assets given synchronized global growth, low volatility and robust economic data, particularly in the United States. As market volatility began to pick up over the course of the period, the Trust’s positioning shifted to a more defensive posture, and the investment adviser began to focus on allocating to more liquid sectors within the fixed income market. In addition, the Trust’s allocation to emerging market debt was reduced as the segment came under pressure in the latter half of the period due to a stronger U.S. dollar, heightened political uncertainty and global trade tensions. Securitized sectors had been resilient despite broad market volatility, but given that spreads in many areas of the securitized market were at their narrowest levels since the 2008 financial crisis, the Trust reduced its allocations to ABS and CMBS. As valuations improved based on waning demand from banks and overseas investors, the Trust rotated into sectors such as agency MBS. The Trust also added some exposure to U.S. Treasuries. The Trust’s duration was reduced over the period, as the investment adviser believed that a combination of increased U.S. Treasury issuance and monetary policy tightening by global central banks would continue to push rates higher.

Describe portfolio positioning at period end.

At period end, the Trust maintained diversified exposure mainly across non-government spread sectors including securitized products, high yield and investment-grade corporate issues, and emerging market debt.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

 

TRUST SUMMARY			11

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Trust Summary  as of October 31, 2018 (continued)		BlackRock Multi-Sector Income Trust

 

Overview of the Trust’s Total Investments

 

 

 

12		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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The Benefits and Risks of Leveraging

 

The Trusts may utilize leverage to seek to enhance the distribution rate on, and net asset value (“NAV”) of, their common shares (“Common Shares”). However, there is no guarantee that these objectives can be achieved in all interest rate environments.

In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by a Trust on its longer-term portfolio investments purchased with the proceeds from leverage. To the extent that the total assets of the Trusts (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, the Trusts’ shareholders benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage is paid to shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share NAV.

To illustrate these concepts, assume a Trust’s capitalization is $100 million and it utilizes leverage for an additional $30 million, creating a total value of $130 million available for investment in longer-term income securities. If prevailing short-term interest rates are 3% and longer-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, a Trust’s financing costs on the $30 million of proceeds obtained from leverage are based on the lower short-term interest rates. At the same time, the securities purchased by a Trust with the proceeds from leverage earn income based on longer-term interest rates. In this case, a Trust’s financing cost of leverage is significantly lower than the income earned on a Trust’s longer-term investments acquired from such leverage proceeds, and therefore the holders of Common Shares (“Common Shareholders”) are the beneficiaries of the incremental net income.

However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Trusts’ return on assets purchased with leverage proceeds, income to shareholders is lower than if the Trusts had not used leverage. Furthermore, the value of the Trusts’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the value of the Trusts’ obligations under their respective leverage arrangements generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Trusts’ NAVs positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that the Trusts’ intended leveraging strategy will be successful.

The use of leverage also generally causes greater changes in each Trust’s NAV, market price and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV and market price of a Trust’s shares than if the Trust were not leveraged. In addition, each Trust may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause the Trusts to incur losses. The use of leverage may limit a Trust’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Trust incurs expenses in connection with the use of leverage, all of which are borne by shareholders and may reduce income to the shareholders. Moreover, to the extent the calculation of the Trusts’ investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Trusts’ investment adviser will be higher than if the Trusts did not use leverage.

Each Trust may utilize leverage through a credit facility or reverse repurchase agreements as described in the Notes to Financial Statements.

Under the Investment Company Act of 1940, as amended (the “1940 Act”), each Trust is permitted to issue debt up to 33 1/3% of its total managed assets. A Trust may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act. In addition, a Trust may also be subject to certain asset coverage, leverage or portfolio composition requirements imposed by its credit facility, which may be more stringent than those imposed by the 1940 Act.

If a Trust segregates or designates on its books and records cash or liquid assets having a value not less than the value of a Trust’s obligations under the reverse repurchase agreement (including accrued interest), then such transaction is not considered a senior security and is not subject to the foregoing limitations and requirements imposed by the 1940 Act.

Derivative Financial Instruments

The Trusts may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. BIT may use economic leverage of up to 100% of its net assets (50% of its total managed assets). The Trusts’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Trust can realize on an investment and/or may result in lower distributions paid to shareholders. The Trusts’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.

 

 

THE BENEFITS AND RISKS OF LEVERAGING / DERIVATIVE FINANCIAL INSTRUMENTS			13

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Schedule of Investments   October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

14		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			15

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

16		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			17

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

18		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			19

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

20		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			21

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

22		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			23

---

Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

 

 

24		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ) (Percentages shown are based on Net Assets)

 

(o)	During the year ended October 31, 2018, investments in issuers considered to be an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate		Shares Held at 10/31/17				Net Activity				Shares Held at 10/31/18				Value at 10/31/18				Income				Net Realized Gain (Loss) (a)				Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class			9,139,477				(1,235,917	)			7,903,560			$	7,903,560			$	137,025			$	32			$	—

 

(a)

Includes net capital gain distributions, if applicable.

For Trust compliance purposes, the Trust’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

Deutsche Bank Securities, Inc.

2.37

%

05/08/18

Open

$

3,806,000

$

3,841,781

U.S. Government Sponsored Agency Securities

Open/Demand

Credit Suisse Securities (USA) LLC

2.50

07/16/18

Open

3,007,813

3,025,734

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

2.50

07/16/18

Open

3,661,226

3,683,041

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

2.50

07/16/18

Open

5,297,906

5,329,473

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

2.50

07/16/18

Open

13,062,500

13,140,331

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

2.55

07/16/18

Open

3,194,125

3,213,631

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

2.55

07/16/18

Open

4,721,483

4,750,316

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/16/18

Open

7,896,600

7,953,385

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/16/18

Open

2,212,500

2,228,410

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/16/18

Open

5,012,500

5,048,545

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/16/18

Open

4,887,500

4,922,647

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/16/18

Open

7,320,000

7,372,639

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/16/18

Open

4,925,000

4,960,736

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/16/18

Open

2,857,500

2,878,234

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.85

07/16/18

Open

3,717,040

3,746,642

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.85

07/16/18

Open

4,675,000

4,712,231

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.85

07/16/18

Open

4,075,000

4,107,453

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.84

07/17/18

Open

6,957,274

7,010,379

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.84

07/17/18

Open

7,787,100

7,846,539

Corporate Bonds

Open/Demand

 

 

SCHEDULES OF INVESTMENTS			25

---

Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

BNP Paribas S.A.

2.84

%

07/17/18

Open

$

8,083,840

$

8,145,544

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

8,880,000

8,943,280

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

7,584,500

7,638,548

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

14,310,000

14,411,975

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

7,095,188

7,145,749

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

6,075,000

6,118,291

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

4,204,688

4,234,651

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

5,300,000

5,337,768

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

3,330,000

3,353,730

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

3,180,113

3,202,774

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

4,015,125

4,043,737

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

4,724,775

4,758,444

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

16,929,000

17,049,638

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

21,125,880

21,276,425

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

3,850,000

3,877,436

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/17/18

Open

7,012,500

7,062,472

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

5,793,750

5,830,967

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

15,274,875

15,372,995

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

5,656,313

5,692,646

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

4,882,969

4,914,335

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

3,086,250

3,106,075

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

4,930,750

4,962,423

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

6,753,075

6,796,454

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

10,128,435

10,193,496

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

10,175,000

10,240,360

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

07/23/18

Open

9,082,125

9,140,465

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.60

07/23/18

Open

10,137,500

10,203,746

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.60

07/23/18

Open

10,275,000

10,342,144

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.62

07/23/18

Open

10,048,500

10,114,722

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.63

07/23/18

Open

9,749,700

9,814,224

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.45

07/25/18

Open

10,809,094

10,873,903

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.45

07/25/18

Open

9,568,781

9,626,154

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.45

07/25/18

Open

16,184,363

16,281,401

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.45

07/25/18

Open

9,921,625

9,981,113

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.45

07/25/18

Open

14,062,500

14,146,816

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.45

07/25/18

Open

13,299,863

13,379,606

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.45

07/25/18

Open

13,350,000

13,430,044

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/25/18

Open

5,522,250

5,558,731

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/25/18

Open

8,131,000

8,184,714

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.85

07/25/18

Open

4,347,120

4,378,914

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.85

07/25/18

Open

4,617,000

4,650,768

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

07/31/18

Open

5,505,000

5,539,578

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

08/20/18

Open

2,840,800

2,853,944

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

1.50

09/07/18

Open

332,655

333,293

Corporate Bonds

Open/Demand

Barclays Bank PLC

3.05

09/10/18

Open

1,585,000

1,591,298

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

09/10/18

Open

12,179,213

12,223,294

Capital Trusts

Open/Demand

RBC Capital Markets LLC

2.59

09/10/18

Open

8,840,650

8,872,044

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/10/18

Open

5,703,750

5,724,005

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/10/18

Open

7,230,000

7,255,675

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/10/18

Open

3,595,688

3,608,456

Corporate Bonds

Open/Demand

Citigroup Global Markets, Inc.

0.25

09/11/18

Open

283,150

283,217

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

6,747,300

6,768,629

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

9,775,000

9,805,900

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

4,440,150

4,454,186

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

10,290,000

10,322,528

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

9,925,000

9,956,374

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

12,480,000

12,519,451

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

14,340,000

14,385,330

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

5,573,125

5,590,742

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

5,555,000

5,572,560

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

11,730,000

11,767,080

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

1,835,000

1,840,801

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

10,375,000

10,407,797

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

11,880,000

11,917,554

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/14/18

Open

17,137,500

17,191,674

Corporate Bonds

Open/Demand

 

 

26		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

Barclays Bank PLC

1.75

%

09/19/18

Open

$

1,813,531

$

1,816,718

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

(1.00

)

09/19/18

Open

877,133

875,610

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.31

09/19/18

Open

1,895,000

1,900,107

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.31

09/19/18

Open

2,964,506

2,972,496

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.31

09/19/18

Open

4,518,750

4,530,928

Corporate Bonds

Open/Demand

UBS Securities LLC

2.25

09/19/18

Open

5,022,957

5,036,152

Corporate Bonds

Open/Demand

UBS Securities LLC

2.25

09/19/18

Open

2,939,688

2,947,404

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/20/18

Open

6,656,250

6,675,561

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

1.25

09/27/18

Open

1,077,465

1,078,662

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.59

09/27/18

Open

7,700,000

7,717,571

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.80

09/28/18

Open

5,652,923

5,666,552

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.80

09/28/18

Open

5,311,425

5,324,231

Corporate Bonds

Open/Demand

RBC Capital Markets LLC

2.56

09/28/18

Open

7,120,000

7,137,214

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.55

10/01/18

Open

4,535,781

4,545,741

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.55

10/01/18

Open

4,700,000

4,710,320

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.55

10/01/18

Open

4,337,500

4,347,024

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.00

10/26/18

Open

5,444,000

5,444,907

Capital Trusts

Open/Demand

$

703,308,404

$

707,102,433

 

(a)

Certain agreements have no stated maturity and can be terminated by either party at any time.

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Description		Number of Contracts				Expiration Date				Notional Amount (000)				Value/ Unrealized Appreciation (Depreciation)
Long Contracts:
2-Year U.S. Treasury Note			533				12/31/18			$	112,280			$	(17,296	)
5-Year U.S. Treasury Note			385				12/31/18				43,267				(315,305	)
															(332,601	)
Short Contracts:
10-Year U.S. Treasury Note			1,643				12/19/18				194,593				1,646,889
10-Year U.S. Ultra Long Treasury Note			342				12/19/18				42,787				1,093,653
Long U.S. Treasury Bond			493				12/19/18				68,096				3,085,040
U.S. Ultra Bond			128				12/19/18				19,100				1,125,041
															6,950,623
														$	6,618,022

Exchange-Traded Options Purchased

 

Description		Number of Contracts				Expiration Date				Exercise Price						Notional Amount (000)						Value
Call
iShares Russell 2000 ETF			7,309				11/16/18			USD			166.00			USD			1,097			$	32,890
Put
10-Year US Treasury Note			1,849				11/23/18			USD			118.00			USD			218,182				548,922
10-Year US Treasury Note			1,193				11/23/18			USD			117.00			USD			139,581				93,203
																							642,125
																						$	675,015

 

 

 

SCHEDULES OF INVESTMENTS			27

---

Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ)

 

OTC Interest Rate Swaptions Purchased

 

Paid by the Trust

Received by the Trust

Description

Rate

Frequency

Rate

Frequency

Counterparty

Expiration Date

Exercise Rate

Notional Amount (000)

Value

Put

30-Year Interest Rate Swap, 06/08/49

3.50

%

Semi-Annual

3-Month LIBOR, 2.56

%,

Quarterly

JPMorgan Chase Bank N.A.

06/06/19

3.50

%

USD

22,700

$

490,019

30-Year Interest Rate Swap, 06/08/49

3.50

Semi-Annual

3-Month LIBOR 2.56

%

Quarterly

Goldman Sachs Bank USA

06/06/19

3.50

USD

25,330

546,792

$

1,036,811

Exchange-Traded Options Written

 

Description

Number of Contracts

Expiration Date

Exercise Price

Notional Amount (000)

Value

Call

iShares Russell 2000 ETF

7,309

11/16/18

USD

170.00

USD

1,097

$

(10,964

)

Centrally Cleared Credit Default Swaps — Sell Protection

 

Reference Obligation/Index

Financing Rate Received by the Trust

Payment Frequency

Termination Date

Credit Rating (a)

Notional Amount (000) (b)

Value

Upfront Premium Paid (Received)

Unrealized Appreciation (Depreciation)

CDX.NA.IG.30.V1

1.00

%

Quarterly

06/20/23

BBB+

USD

100,000

$

1,705,567

$

1,572,884

$

132,683

 

(a)

Using Standard & Poor’s (“S&P’s”) rating of the issuer or the underlying securities of the index, as applicable.

(b)

The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

Centrally Cleared Interest Rate Swaps

 

Paid by the Trust

Received by the Trust

Termination Date

Notional Amount (000)

Value

Upfront Premium Paid (Received)

Unrealized Appreciation (Depreciation)

Rate

Frequency

Rate

Frequency

3-Month LIBOR 2.56%

Quarterly

1.79%

Semi-annual

09/30/19

USD

100,370

$

(1,051,715

)

$

224

$

(1,051,939

)

OTC Credit Default Swaps — Buy Protection

 

Reference Obligation/Index		Financing Rate Paid by the Trust				Payment Frequency		Counterparty		Termination Date				Notional Amount (000)						Value				Upfront Premium Paid (Received)				Unrealized Appreciation (Depreciation)
Citigroup, Inc.			1.00	%		Quarterly		Deutsche Bank AG			03/20/19			USD			16,700			$	(67,853	)		$	(5,742	)		$	(62,111	)
Prudential Financial, Inc.			1.00			Quarterly		Citibank N.A.			06/20/21			USD			1,920				(36,013	)			14,853				(50,866	)
Prudential Financial, Inc.			1.00			Quarterly		Goldman Sachs International			06/20/21			USD			1,155				(21,664	)			9,504				(31,168	)
Prudential Financial, Inc.			1.00			Quarterly		JPMorgan Chase Bank N.A.			06/20/21			USD			9,500				(178,190	)			64,306				(242,496	)
																				$	(303,720	)		$	82,921			$	(386,641	)

OTC Credit Default Swaps — Sell Protection

 

Reference Obligation/Index		Financing Rate Received by the Trust				Payment Frequency				Counterparty		Termination Date				Credit Rating (a)		Notional Amount (000) (b)								Value				Upfront Premium Paid (Received)				Unrealized Appreciation (Depreciation)
Bank of America Corp.			1.00	%			Quarterly			Deutsche Bank AG			03/20/19			A-			USD				16,700			$	74,020			$	10,237			$	63,783
American Tower Corp.			1.00				Quarterly			Morgan Stanley & Co. International PLC			06/20/21			BBB-			USD				10,000				(25,084	)			(219,075	)			193,991
																										$	48,936			$	(208,838	)		$	257,774

 

(a)

Using Standard & Poor’s (“S&P’s”) rating of the issuer or the underlying securities of the index, as applicable.

(b)

The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

 

 

28		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ)

 

Balances Reported in the Statements of Assets and Liabilities for Centrally Cleared Swaps, OTC Swaps and Options Written

 

		Swap Premiums Paid		Swap Premiums Received				Unrealized Appreciation		Unrealized Depreciation				Value
Centrally Cleared Swaps(a)		$1,573,108		$	—			$132,683		$	(1,051,939	)		$	—
OTC Swaps		98,900			(224,817	)		257,774			(386,641	)			—
Options Written		N/A			N/A			53,104			—				(10,964	)

 

(a)

Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statememts of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

 

Derivative Financial Instruments Categorized by Risk Exposure   As of year end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Assets — Derivative Financial Instruments
Futures contracts
Net unrealized appreciation(a)		$	—			$	—			$	—			$	—			$	6,950,623			$	—			$	6,950,623
Options purchased
Investments at value — unaffiliated(b)			—				—				32,890				—				1,678,936				—				1,711,826
Swaps — centrally cleared
Net unrealized appreciation(a)			—				132,683				—				—				—				—				132,683
Swaps — OTC
Unrealized appreciation on OTC swaps; Swap premiums paid			—				356,674				—				—				—				—				356,674
		$	—			$	489,357			$	32,890			$	—			$	8,629,559			$	—			$	9,151,806
Liabilities — Derivative Financial Instruments
Futures contracts
Net unrealized depreciation(a)		$	—			$	—			$	—			$	—			$	332,601			$	—			$	332,601
Options written
Options written at value			—				—				10,964				—								—				10,964
Swaps — centrally cleared
Net unrealized depreciation(a)			—				—				—				—				1,051,939				—				1,051,939
Swaps — OTC
Unrealized depreciation on OTC swaps; Swap premiums received			—				611,458				—				—				—				—				611,458
		$	—			$	611,458			$	10,964			$	—			$	1,384,540			$	—			$	2,006,962

 

(a)

Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

(b)

Includes options purchased at value as reported in the Schedule of Investments.

For the year ended October 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Net Realized Gain (Loss) from:
Futures contracts		$	—			$	—			$	—			$	—			$	10,634,400			$	—			$	10,634,400
Options purchased(a)			—				—				(335,043	)			—				516,364				—				181,321
Options written											120,877																120,877
Swaps			—				235,417				—				—				(409,159	)			—				(173,742	)
		$	—			$	235,417			$	(214,166	)		$	—			$	10,741,605			$	—			$	10,762,856
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		$	—			$	—			$	—			$	—			$	5,009,796			$	—			$	5,009,796
Options purchased(b)			—								(173,474	)			—				(11,575	)			—				(185,049	)
Options written			—				—				53,104				—				—				—				53,104
Swaps			—				242,161				—				—				(948,708	)			—				(706,547	)
		$	—			$	242,161			$	(120,370	)		$	—			$	4,049,513			$	—			$	4,171,304

 

 

SCHEDULES OF INVESTMENTS			29

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ)

 

 

(a) Options purchased are included in net realized gain (loss) from investments. (b) Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:
Average notional value of contracts — long		$	65,040,246
Average notional value of contracts — short		$	394,890,506
Options:
Average value of option contracts purchased		$	168,754
Average value of option contracts written		$	2,741
Average notional value of swaption contracts purchased		$	48,030,000
Credit default swaps:
Average notional value — buy protection		$	29,579,755
Average notional value — sell protection		$	102,456,250
Interest rate swaps:
Average notional value — receives fixed rate		$	131,340,000

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Trust’s derivative assets and liabilities (by type) were as follows:

 

		Assets				Liabilities
Futures contracts		$	1,262,251			$	150,844
Options			1,711,826	(a)			10,964
Swaps — Centrally cleared			—				992
Swaps — OTC(b)			356,674				611,458
Total derivative assets and liabilities in the Statements of Assets and Liabilities		$	3,330,751			$	774,258
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)			(1,937,266	)			(162,800	)
Total derivative assets and liabilities subject to an MNA		$	1,393,485			$	611,458

 

(a)

Includes options purchased at value which is included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

(b)

Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statements of Assets and Liabilities.

The following table presents the Trust’s derivative assets (and liabilities) by counterparty net of amounts available for offset under an MNA and net of the related collateral received (and pledged) by the Trust:

 

Counterparty		Derivative Assets Subject to an MNA by Counterparty				Derivatives Available for Offset (a)				Non-cash Collateral Received				Cash Collateral Received (b)				Net Amount of Derivative Assets (c)
Citibank N.A.		$	14,853			$	(14,853	)		$	—			$	—			$	—
Deutsche Bank AG			74,020				(67,853	)			—				—				6,167
Goldman Sachs Bank USA			546,792				—				—				(300,000	)			246,792
Goldman Sachs International			9,504				(9,504	)			—				—				—
JPMorgan Chase Bank N.A.			554,325				(242,496	)			—				(311,829	)			—
Morgan Stanley & Co. International PLC			193,991				(193,991	)			—				—				—
		$	1,393,485			$	(528,697	)		$	—			$	(611,829	)		$	252,959
Counterparty		Derivative Liabilities Subject to an MNA by Counterparty				Derivatives Available for Offset (a)				Non-cash Collateral Pledged				Cash Collateral Pledged				Net Amount of Derivative Liabilities (d)
Citibank N.A.		$	50,866			$	(14,853	)		$	—			$	—			$	36,013
Deutsche Bank AG			67,853				(67,853	)			—				—				—
Goldman Sachs International			31,168				(9,504	)			—				—				21,664
JPMorgan Chase Bank N.A.			242,496				(242,496	)			—				—				—
Morgan Stanley & Co International PLC			219,075				(193,991	)			—				—				25,084
		$	611,458			$	(528,697	)		$	—			$	—			$	82,761

 

(a)

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

 

 

30		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ)

 

(b)

Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

(c)

Net amount represents the net amount receivable from the counterparty in the event of default.

(d)

Net amount represents the net amount payable due to counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statements of Assets and Liabilities.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

		Level 1				Level 2				Level 3				Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		$	—			$	120,712,408			$	3,049,935			$	123,762,343
Corporate Bonds			—				1,563,957,769				5,249,823				1,569,207,592
Foreign Agency Obligations			—				32,788,648				—				32,788,648
Municipal Bonds			—				17,200,950				—				17,200,950
Preferred Securities			51,070,581				309,285,629				—				360,356,210
U.S. Government Sponsored Agency Securities			—				3,842,515				—				3,842,515
Short-Term Securities			7,903,560				—				—				7,903,560
Options Purchased:
Equity contracts			32,890				—				—				32,890
Interest rate contracts			642,125				1,036,811				—				1,678,936
		$	59,649,156			$	2,048,824,730			$	8,299,758			$	2,116,773,644
Derivative Financial Instruments(a)
Assets:
Credit contracts		$	—			$	390,457			$	—			$	390,457
Interest rate contracts			6,950,623				—				—				6,950,623
Liabilities:
Credit contracts			—				(386,641	)			—				(386,641	)
Equity contracts			(10,964	)			—				—				(10,964	)
Interest rate contracts			(332,601	)			(1,051,939	)			—				(1,384,540	)
		$	6,607,058			$	(1,048,123	)		$	—			$	5,558,935

 

(a)

Derivative financial instruments are swaps, futures contracts and options written. Swaps and futures contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

The Trust may hold liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, reverse repurchase agreements of $ 707,102,433 are categorized as Level 2 within the disclosure hierarchy.

During the year ended October 31, 2018, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

		Asset-Backed Securities				Corporate Bonds				Total
Assets:
Opening balance, as of October 31, 2017		$	7,500,000			$	5,007,000			$	12,507,000
Transfers into Level 3			—				—				—
Transfers out of Level 3(a)			(7,500,000	)			—				(7,500,000	)
Accrued discounts/premiums			—				—				—
Net realized gain (loss)			—				—				—
Net change in unrealized appreciation (depreciation)(b)(c)			(65	)			(47,177	)			(47,242	)
Purchases			3,050,000				290,000				3,340,000
Sales			—				—				—
Closing Balance, as of October 31, 2018		$	3,049,935			$	5,249,823			$	8,299,758
Net change in unrealized appreciation (depreciation) on investments still held at October 31, 2018(c)		$	(65	)		$	(47,177	)		$	(47,242	)

 

(a)

As of October 31, 2017, the Trust used significant unobservable inputs in determining the value of certain investments. As of October 31, 2018, the Trust used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy.

(b)

Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

 

 

SCHEDULES OF INVESTMENTS			31

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Schedule of Investments  (continued) October 31, 2018		BlackRock Credit Allocation Income Trust (BTZ)

 

(c)

Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at October 31, 2018 is generally due to investments no longer held or categorized as Level 3 at period end.

The Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See notes to financial statements.

 

 

32		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			33

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

34		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			35

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

36		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			37

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

38		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			39

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

40		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

SCHEDULES OF INVESTMENTS			41

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

 

 

42		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT) (Percentages shown are based on Net Assets)

 

(l)	During the year ended October 31, 2018, investments in issuers considered to be affiliates of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, and/or related parties of the Trust were as follows:

 

Affiliate Persons and/or Related Parties			Shares Held at 10/31/17				Shares Purchased				Shares Sold				Shares Held at 10/31/18				Value at 10/31/18				Income				Net Realized Gain (Loss)	(a)			Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class			1,895,053				—				(1,612,145	) (b)			282,908			$	282,908			$	27,439			$	8			$	—
iShares iBoxx USD High Yield Corporate Bond ETF			19,000				70,000				(89,000	)			—				—				60,813				(42,986	)			(1,767	)
																		$	282,908			$	88,252			$	(42,978	)		$	(1,767	)

 

(a)

Includes net capital gain distributions, if applicable.

(b)

Represents net shares sold.

For Trust compliance purposes, the Trust’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 

 

 

SCHEDULES OF INVESTMENTS			43

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT)

 

Derivative Financial Instruments Outstanding as of Period End

Forward Foreign Currency Exchange Contracts

 

Currency Purchased						Currency Sold						Counterparty		Settlement Date				Unrealized Appreciation (Depreciation)
EUR			980,000			USD			1,109,360			JPMorgan Chase Bank N.A.			11/05/18			$	893
GBP			2,574,000			USD			3,282,880			Barclays Bank PLC			11/05/18				7,616
USD			1,145,804			EUR			987,000			UBS AG			11/05/18				27,621
USD			3,382,117			GBP			2,589,000			Citibank N.A.			11/05/18				72,446
																			108,576
USD			1,111,929			EUR			980,000			JPMorgan Chase Bank N.A.			12/05/18				(978	)
USD			3,287,073			GBP			2,574,000			Barclays Bank PLC			12/05/18				(7,833	)
																			(8,811	)
																		$	99,765

OTC Options Purchased

 

Description

Counterparty

Number of Contracts

Expiration Date

Exercise Price

Notional Amount (000)

Value

Call

Marsico Parent Superholdco LLC

Goldman Sachs & Co.

26

12/14/19

USD

942.86

USD

—

$

—

OTC Total Return Swaps

 

Paid by the Trust				Received by the Trust						Counterparty		Termination Date				Notional Amount (000)								Value				Upfront Premium Paid (Received)				Unrealized Appreciation (Depreciation)
Reference		Frequency		Rate				Frequency
3-Month LIBOR, 2.56%,		Quarterly			Markit iboxx USDLiquid Leveraged Loans Total Return Index			Quarterly		Credit Suisse International			12/20/18				USD				5,015			$	10,889			$	—			$	10,889
3-Month LIBOR, 2.56%,		Quarterly			Markit iboxx USDLiquid Leveraged Loans Total Return Index			At Termination		Credit Suisse International			12/20/18				USD				5,015				(8,389	)			—				(8,389	)
																								$	2,500			$	—			$	2,500

Balances Reported in the Statements of Assets and Liabilities for OTC Swaps

 

		Swap Premiums Paid				Swap Premiums Received				Unrealized Appreciation				Unrealized Depreciation
OTC Swaps		$	—			$	—			$	10,889			$	(8,389	)

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Assets — Derivative Financial Instruments
Forward foreign currency exchange contracts
Unrealized appreciation on forward foreign currency exchange contracts		$	—			$	—			$	—			$	108,576			$	—			$	—			$	108,576
Swaps — OTC
Unrealized appreciation on OTC swaps; Swap premiums paid			—				—				—				—				10,889				—				10,889
		$	—			$	—			$	—			$	108,576			$	10,889			$	—			$	119,465

 

 

44		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT)

 

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Liabilities — Derivative Financial Instruments
Forward foreign currency exchange contracts
Unrealized depreciation on forward foreign currency exchange contracts		$	—			$	—			$	—			$	8,811			$	—			$	—			$	8,811
Swaps — OTC
Unrealized depreciation on OTC swaps; Swap premiums received			—				—				—				—				8,389				—				8,389
		$	—			$	—			$	—			$	8,811			$	8,389			$	—			$	17,200

For the year ended October 31, 2018, the effect of derivative financial instruments in the Statements of Operations was as follows:

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Net Realized Gain (Loss) from:
Forward foreign currency exchange contracts		$	—			$	—			$	—			$	100,014			$	—			$	—			$	100,014
Options purchased(a)			—				—				—				—				93,782				—				93,782
Swaps			—				(2,682	)			—				—				(4,542	)			—				(7,224	)
		$	—			$	(2,682	)		$	—			$	100,014			$	89,240			$	—			$	186,572
Net Change in Unrealized Appreciation (Depreciation) on:
Forward foreign currency exchange contracts		$	—			$	—			$	—			$	91,222			$	—			$	—			$	91,222
Options purchased(b)			—				—				—				—				7,800				—				7,800
Swaps			—				36,737				—				—				2,500				—				39,237
		$	—			$	36,737			$	—			$	91,222			$	10,300			$	—			$	138,259

 

(a)

Options purchased are included in net realized gain (loss) from investments.

(b)

Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Forward foreign currency exchange contracts:
Average amounts purchased — in USD		$	4,444,668
Average amounts sold — in USD		$	1,837,036
Options:
Average notional value of swaption contracts purchased		$	5,775,000
Credit default swaps:
Average notional value — buy protection		$	582,250
Average notional value — sell protection		$	—	(a)
Total return swaps:
Average notional value		$	2,507,500

 

(a)

Derivative not held at quarter-end. The amount shown in the Statements of Operations reflect the results of activity during the period.

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Trust’s derivative assets and liabilities (by type) were as follows:

 

		Assets				Liabilities
Forward foreign currency exchange contracts		$	108,576			$	8,811
Swaps — OTC(a)			10,889				8,389
Total derivative assets and liabilities in the Statements of Assets and Liabilities		$	119,465			$	17,200
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)			—				—
Total derivative assets and liabilities subject to an MNA		$	119,465			$	17,200

 

(a)

Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statements of Assets and Liabilities.

 

 

 

SCHEDULES OF INVESTMENTS			45

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT)

 

The following tables present the Trust’s derivative assets (and liabilities) by counterparty net of amounts available for offset under a MNA and net of the related collateral received (and pledged) by the Trust:

 

Counterparty		Derivative Assets Subject to an MNA by Counterparty				Derivatives Available for Offset (a)				Non-cash Collateral Received				Cash Collateral Received				Net Amount of Derivative Assets  (b)
Barclays Bank PLC		$	7,616			$	(7,616	)		$	—			$	—			$	—
Citibank N.A.			72,446				—				—				—				72,446
Credit Suisse International			10,889				(8,389	)			—				—				2,500
JPMorgan Chase Bank N.A.			893				(893	)			—				—				—
UBS AG			27,621				—				—				—				27,621
		$	119,465			$	(16,898	)		$	—			$	—			$	102,567
Counterparty		Derivative Liabilities Subject to an MNA by Counterparty				Derivatives Available for Offset (a)				Non-cash Collateral Pledged				Cash Collateral Pledged				Net Amount of Derivative Liabilities  (c)(d)
Barclays Bank PLC		$	7,833			$	(7,616	)		$	—			$	—			$	217
Credit Suisse International			8,389				(8,389	)			—				—				—
JPMorgan Chase Bank N.A.			978				(893	)			—				—				85
		$	17,200			$	(16,898	)		$	—			$	—			$	302

 

(a)

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

(b)

Net amount represents the net amount receivable from the counterparty in the event of default.

(c)

Net amount represents the net amount payable due to counterparty in the event of default.

(d)

Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

		Level 1				Level 2				Level 3				Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		$	—			$	18,278,258			$	2,699,975			$	20,978,233
Common Stocks			112,616				49,621				529,149				691,386
Corporate Bonds			—				10,530,626				—				10,530,626
Floating Rate Loan Interests			—				425,446,027				27,220,796				452,666,823
Investment Companies			5,637,450				—				—				5,637,450
Other Interests			—				—				5				5
Short-Term Securities			282,908				—				—				282,908
Liabilities:
Unfunded Floating Rate Loan Interests(a)			—				(676	)			(138	)			(814	)
		$	6,032,974			$	454,303,856			$	30,449,787			$	490,786,617
Derivative Financial Instruments(b)
Assets:
Forward foreign currency contracts		$	—			$	108,576			$	—			$	108,576
Interest Rate Contracts			—				10,889				—				10,889
Liabilities:
Forward foreign currency contracts			—				(8,811	)			—				(8,811	)
Interest Rate Contracts			—				(8,389	)			—				(8,389	)
		$				$	102,265			$				$	102,265

 

(a)

Unfunded floating rate loan interests are valued at the unrealized appreciation (depreciation) on the commitment.

(b)

Derivative financial instruments are swaps and forward foreign currency exchange contracts. Swaps and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument.

 

 

 

46		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Schedule of Investments  (continued) October 31, 2018		BlackRock Floating Rate Income Trust (BGT)

 

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, bank borrowings payable of $142,000,000 are categorized as Level 2 within the disclosure hierarchy.

During the year ended October 31, 2018, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

		Asset-Backed Securities				Common Stocks				Floating Rate Loan Interests				Rights				Other Interests				Unfunded Floating Rate Loan Interests				Warrants				Total
Assets:
Opening balance, as of October 31, 2017		$	—			$	6			$	17,889,778			$	27,272			$	5			$	—			$	45			$	17,917,106
Transfers into Level 3(a)			—				125,925				8,629,734				—				—				—				—				8,755,659
Transfers out of Level 3(b)			—				—				(5,187,437	)			—				—				—				—				(5,187,437	)
Accrued discounts/premiums			—				—				56,113				—				—				—				—				56,113
Net realized gain (loss)			—				—				(410,428	)			18,947				—				—				(937	)			(392,418	)
Net change in unrealized appreciation (depreciation)(c)(d)			(25	)			75,610				238,481				(27,272	)			—				(138	)			892				287,548
Purchases			2,700,000				327,608				20,125,144				—				—				—				—				23,152,752
Sales			—				—				(14,120,589	)			(18,947	)			—				—				—				(14,139,536	)
Closing Balance, as of October 31, 2018		$	2,699,975			$	529,149			$	27,220,796			$	—			$	5			$	(138	)		$	—			$	30,449,787
Net change in unrealized appreciation (depreciation) on investments still held at October 31, 2018(d)		$	(25	)		$	75,616			$	(67,316	)		$	—			$	—			$	(138	)		$	(45	)		$	8,092

 

(a)

As of October 31, 2017, the Trust used observable inputs in determining the value of certain investments. As of October 31, 2018, the Trust used significant unobservable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 2 to Level 3 in the disclosure hierarchy.

(b)

As of October 31, 2017, the Trust used significant unobservable inputs in determining the value of certain investments. As of October 31, 2018, the Trust used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy.

(c)

Included in the related net change in unrealized appreciation (depreciation) in the Statements of Operations.

(d)

Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at October 31, 2018 is generally due to investments no longer held or categorized as Level 3 at period end.

The Trust’s investments that are categorized as Level 3 were valued utilizing third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in third party information could result in a significantly lower or higher value of such Level 3 investments.

See notes to financial statements.

 

 

SCHEDULES OF INVESTMENTS			47

---

Consolidated Schedule of Investments October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

48		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			49

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

50		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			51

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

52		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			53

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

54		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			55

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

56		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			57

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

58		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			59

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

60		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			61

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

62		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			63

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

64		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			65

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT) (Percentages shown are based on Net Assets)

 

During the year ended October 31, 2018, investments in issuers considered to an affiliate of the Trust for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

Affiliate		Shares Held at 10/31/17				Net Activity				Shares Held at 10/31/18				Value at 10/31/18				Income				Net Realized Gain (Loss) (b)				Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds, T-Fund, Institutional Class(a)			347,225				(347,225	)			—			$	—			$	111,086			$	—			$	—

 

(a)

No longer held by the Trust.

(b)

Includes net capital gain distributions, if applicable.

For Trust compliance purposes, the Trust’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Reverse Repurchase Agreements

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

BNP Paribas S.A.

2.87

%

07/11/18

Open

$

280,638

$

282,927

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/11/18

Open

367,901

370,991

Corporate Bonds

Open/Demand

 

 

66		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

RBC Capital Markets, LLC

2.85

%

07/12/18

Open

$

171,140

$

172,565

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.75

07/16/18

Open

411,810

414,873

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.75

07/16/18

Open

128,048

129,000

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.80

07/16/18

Open

1,012,833

1,020,448

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/16/18

Open

229,133

230,871

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/16/18

Open

225,600

227,311

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.80

07/16/18

Open

268,898

270,937

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/16/18

Open

247,903

249,783

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/16/18

Open

242,110

243,947

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/16/18

Open

245,520

247,383

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/16/18

Open

232,825

234,591

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/16/18

Open

945,000

951,888

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/16/18

Open

688,125

693,141

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/16/18

Open

470,625

474,055

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.85

07/16/18

Open

450,450

453,934

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.85

07/16/18

Open

676,875

682,110

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.85

07/16/18

Open

1,021,355

1,029,255

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.88

07/16/18

Open

132,224

133,258

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.88

07/16/18

Open

151,800

152,988

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.95

07/16/18

Open

752,378

758,421

Foreign Agency Obligations

Open/Demand

Deutsche Bank Securities, Inc.

2.80

07/16/18

Open

1,785,000

1,798,541

Capital Trusts

Open/Demand

Deutsche Bank Securities, Inc.

2.80

07/16/18

Open

2,320,000

2,337,600

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.80

07/16/18

Open

1,901,000

1,915,421

Capital Trusts

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/16/18

Open

267,000

269,145

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/16/18

Open

198,000

199,590

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/16/18

Open

141,000

142,133

Corporate Bonds

Open/Demand

HSBC Securities (USA), Inc.

2.70

07/16/18

Open

538,000

541,921

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

07/16/18

Open

2,176,200

2,191,849

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

520,830

524,978

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

487,335

491,216

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

435,070

438,535

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

266,230

268,350

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

153,755

154,979

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

366,818

369,739

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

464,313

468,010

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

727,575

733,369

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

93,240

93,983

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

985,725

993,575

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

378,730

381,746

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

165,600

166,919

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

187,200

188,691

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

370,450

373,400

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

259,260

261,325

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

436,050

439,523

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

694,200

699,729

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

172,010

173,380

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

87,413

88,109

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

250,400

252,394

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/16/18

Open

509,220

513,275

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/17/18

Open

348,735

351,356

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/17/18

Open

492,069

495,767

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.80

07/17/18

Open

827,038

833,253

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.80

07/17/18

Open

2,156,250

2,172,455

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.90

07/17/18

Open

293,693

295,986

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/17/18

Open

316,030

318,552

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/17/18

Open

260,925

262,809

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.85

07/17/18

Open

669,375

674,504

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.91

07/17/18

Open

285,289

287,525

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/17/18

Open

2,008,000

2,023,978

Capital Trusts

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/17/18

Open

671,000

676,339

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/17/18

Open

2,528,000

2,548,115

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/17/18

Open

297,000

299,363

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/17/18

Open

750,000

755,968

Corporate Bonds

Open/Demand

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			67

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

RBC Capital Markets, LLC

2.85

%

07/17/18

Open

$

729,125

$

734,879

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

257,400

259,431

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

330,750

333,360

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

299,700

302,065

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

164,730

166,030

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

190,390

191,892

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

268,800

270,921

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

268,000

270,115

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

256,500

258,524

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

321,850

324,390

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

412,300

415,554

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/17/18

Open

34,270

34,540

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/18/18

Open

213,030

214,696

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/18/18

Open

199,650

201,211

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.66

07/20/18

Open

319,125

321,349

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/23/18

Open

207,863

209,279

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/23/18

Open

241,870

243,518

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/23/18

Open

272,483

274,339

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/23/18

Open

248,105

249,795

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

07/23/18

Open

249,840

251,542

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/23/18

Open

1,274,000

1,283,564

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/23/18

Open

2,016,000

2,031,134

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/23/18

Open

440,000

443,303

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/23/18

Open

873,000

879,554

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/23/18

Open

2,666,000

2,686,014

Capital Trusts

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/23/18

Open

296,000

298,222

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

07/23/18

Open

490,000

493,678

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/24/18

Open

359,100

361,752

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

(1.00

)

07/25/18

Open

48,191

48,060

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/25/18

Open

300,544

302,632

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/25/18

Open

162,240

163,367

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.85

07/25/18

Open

102,638

103,365

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.91

07/25/18

Open

250,013

251,825

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/25/18

Open

503,010

506,689

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/25/18

Open

149,850

150,946

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

07/25/18

Open

307,545

309,794

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/30/18

Open

233,761

235,319

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

07/31/18

Open

241,349

242,941

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/01/18

Open

128,760

129,637

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/01/18

Open

78,720

79,256

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

08/02/18

Open

2,209,550

2,223,249

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.80

08/02/18

Open

2,148,750

2,162,615

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.92

08/02/18

Open

239,080

240,678

Capital Trusts

Open/Demand

RBC Capital Markets, LLC

2.85

08/02/18

Open

1,287,877

1,296,552

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.05

08/13/18

Open

190,380

191,286

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/14/18

Open

434,730

437,282

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/15/18

Open

415,625

418,034

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/16/18

Open

2,194,430

2,206,993

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/17/18

Open

150,880

151,631

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.30

08/20/18

Open

8,107,000

8,144,292

Capital Trusts

Open/Demand

Barclays Bank PLC

2.55

08/20/18

Open

4,054,406

4,075,084

Capital Trusts

Open/Demand

Barclays Bank PLC

2.55

08/20/18

Open

567,665

570,560

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.55

08/20/18

Open

3,251,375

3,267,957

Capital Trusts

Open/Demand

Barclays Bank PLC

2.55

08/20/18

Open

3,093,125

3,108,900

Capital Trusts

Open/Demand

Barclays Bank PLC

2.75

08/20/18

Open

792,895

796,865

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.95

08/20/18

Open

1,859,546

1,868,867

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.56

08/20/18

Open

7,702,500

7,738,139

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.65

08/20/18

Open

455,648

457,838

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

08/20/18

Open

5,355,625

5,381,905

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.70

08/20/18

Open

280,720

282,097

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

08/20/18

Open

387,600

389,502

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

08/20/18

Open

226,528

227,639

Corporate Bonds

Open/Demand

 

 

68		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

BNP Paribas S.A.

2.94

%

08/20/18

Open

$

1,262,479

$

1,269,280

Capital Trusts

Open/Demand

Credit Suisse Securities (USA) LLC

2.50

08/20/18

Open

811,714

815,372

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

2.55

08/20/18

Open

745,388

748,821

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

08/20/18

Open

934,000

939,050

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

08/20/18

Open

517,000

519,795

Corporate Bonds

Open/Demand

HSBC Securities (USA), Inc.

2.70

08/20/18

Open

273,000

274,340

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

08/20/18

Open

613,800

616,818

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

08/20/18

Open

324,625

326,221

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/20/18

Open

175,055

176,007

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

08/20/18

Open

59,940

60,266

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.55

08/21/18

Open

179,975

180,781

Capital Trusts

Open/Demand

Barclays Bank PLC

2.75

08/21/18

Open

648,795

651,998

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.75

08/21/18

Open

480,844

483,218

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.75

08/21/18

Open

322,455

324,047

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.80

08/21/18

Open

939,103

943,765

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.55

08/21/18

Open

363,863

365,492

Capital Trusts

Open/Demand

Barclays Capital, Inc.

2.75

08/21/18

Open

207,025

208,033

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.75

08/21/18

Open

482,183

484,496

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.75

08/21/18

Open

81,218

81,607

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.75

08/21/18

Open

1,310,128

1,316,414

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.75

08/21/18

Open

842,906

846,951

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.75

08/21/18

Open

333,568

335,168

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

1.25

09/07/18

Open

150,605

150,893

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

1.25

09/07/18

Open

40,885

40,944

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

09/07/18

Open

179,314

179,975

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

09/07/18

Open

28,362

28,479

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.75

09/10/18

Open

479,719

481,421

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.80

09/10/18

Open

1,548,756

1,554,362

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.80

09/10/18

Open

402,675

404,132

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.85

09/10/18

Open

405,765

407,262

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

09/10/18

Open

266,430

267,394

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

955,000

958,391

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

271,500

272,464

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

945,000

948,356

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

697,500

699,977

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

701,250

703,740

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

406,000

407,442

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

731,250

733,847

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

351,000

352,246

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

484,900

486,622

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

902,500

905,705

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

930,000

933,303

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

1,455,000

1,460,167

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

511,250

513,066

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

433,125

434,663

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

585,000

587,077

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

242,500

243,361

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

383,000

384,360

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

492,500

494,249

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

1,134,375

1,138,403

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

676,875

679,279

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

885,000

888,143

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

915,000

918,249

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

1,417,500

1,422,534

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

452,500

454,107

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

456,250

457,870

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

1,022,500

1,026,131

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

821,250

824,166

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

689,750

692,199

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

985,000

988,498

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

439,875

441,437

Corporate Bonds

Open/Demand

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			69

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

RBC Capital Markets, LLC

2.59

%

09/10/18

Open

$

701,250

$

703,740

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

690,000

692,450

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

547,500

549,444

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

475,000

476,687

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

872,500

875,598

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

502,500

504,284

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

353,000

354,254

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

902,500

905,705

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

1,350,000

1,354,794

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/10/18

Open

864,375

867,444

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

225,863

226,748

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

914,338

917,921

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

216,213

217,060

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

214,475

215,316

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

226,448

227,335

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

164,500

165,145

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

218,400

219,256

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

408,688

410,289

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

188,940

189,681

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

209,528

210,349

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

318,835

320,085

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

183,180

183,898

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

193,200

193,957

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

217,283

218,134

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

292,410

293,556

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

183,150

183,868

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

288,090

289,219

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

229,323

230,221

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

157,590

158,208

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

422,300

423,955

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

375,000

376,470

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

2,955,000

2,966,582

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

291,555

292,698

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

483,923

485,819

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

191,625

192,376

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

171,293

171,964

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

558,000

560,187

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

429,260

430,942

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/10/18

Open

217,035

217,886

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

09/11/18

Open

484,270

485,988

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.91

09/11/18

Open

288,135

289,202

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.91

09/11/18

Open

330,240

331,462

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.91

09/11/18

Open

614,378

616,652

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.91

09/11/18

Open

299,130

300,237

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.91

09/11/18

Open

368,510

369,874

Corporate Bonds

Open/Demand

Citigroup Global Markets, Inc.

0.25

09/11/18

Open

22,652

22,657

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/11/18

Open

385,000

386,342

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/11/18

Open

188,500

189,157

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/11/18

Open

1,385,720

1,390,551

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/11/18

Open

1,209,600

1,213,817

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/11/18

Open

283,650

284,639

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/11/18

Open

652,750

655,026

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

1,153,680

1,158,118

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

2,151,560

2,159,838

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

172,270

172,933

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

180,910

181,606

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

180,180

180,873

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

230,850

231,738

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

229,500

230,383

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

209,925

210,733

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

435,750

437,426

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

227,960

228,837

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

325,718

326,971

Corporate Bonds

Open/Demand

 

 

70		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

RBC Capital Markets, LLC

2.85

%

09/11/18

Open

$

221,253

$

222,104

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

173,775

174,444

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

296,140

297,279

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

351,323

352,674

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

335,200

336,490

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

245,180

246,123

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

124,603

125,082

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

665,125

667,684

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

300,120

301,275

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/11/18

Open

253,530

254,505

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

09/12/18

Open

273,880

274,852

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

09/12/18

Open

280,884

281,881

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/12/18

Open

313,320

314,525

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

1.00

09/13/18

Open

184,110

184,327

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

0.75

09/13/18

Open

91,160

91,225

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/13/18

Open

816,140

819,162

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

(0.75

)

09/14/18

Open

295,740

295,366

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/14/18

Open

173,400

173,948

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/14/18

Open

118,750

119,125

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

378,840

380,161

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

200,340

201,038

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

255,000

255,889

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

167,983

168,568

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

332,500

333,659

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

285,548

286,543

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

273,600

274,554

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

194,560

195,238

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

252,395

253,275

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

498,550

500,288

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

694,450

696,871

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

98,910

99,255

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

217,350

218,108

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

281,325

282,306

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

539,200

541,080

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

166,250

166,830

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

178,500

179,122

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

209,990

210,722

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

409,078

410,504

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

681,120

683,494

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

285,830

286,826

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

1,536,668

1,542,024

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

282,900

283,886

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

190,325

190,989

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

335,340

336,509

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

236,338

237,161

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

473,123

474,772

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

116,188

116,593

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

397,500

398,886

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

109,855

110,238

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

244,833

245,686

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

115,900

116,304

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

161,195

161,757

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

206,815

207,536

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

140,250

140,739

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

324,815

325,947

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

675,315

677,669

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

215,970

216,723

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

349,200

350,417

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

248,820

249,687

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

583,255

585,288

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

130,900

131,356

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

216,645

217,400

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

210,013

210,745

Corporate Bonds

Open/Demand

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			71

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

RBC Capital Markets, LLC

2.85

%

09/14/18

Open

$

20,563

$

20,634

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

298,150

299,189

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

822,165

825,031

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

199,565

200,261

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

333,325

334,487

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

172,200

172,800

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

233,373

234,186

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

240,470

241,308

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

946,890

950,191

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

431,950

433,456

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

323,850

324,979

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

247,350

248,212

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

729,605

732,148

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

1,947,668

1,954,457

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

119,145

119,560

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

357,870

359,118

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

83,363

83,653

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

403,425

404,831

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

1,238,790

1,243,109

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

266,985

267,916

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

137,618

138,097

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

678,615

680,981

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

267,300

268,232

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/14/18

Open

404,250

405,659

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.25

09/19/18

Open

167,929

168,370

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.55

09/19/18

Open

393,975

395,147

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.39

09/19/18

Open

460,625

461,909

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.39

09/19/18

Open

697,125

699,069

Foreign Agency Obligations

Open/Demand

BNP Paribas S.A.

2.60

09/19/18

Open

111,930

112,270

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.63

09/19/18

Open

405,150

406,393

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.67

09/19/18

Open

648,735

650,756

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.67

09/19/18

Open

466,613

468,066

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.67

09/19/18

Open

476,545

478,029

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.67

09/19/18

Open

351,500

352,595

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.67

09/19/18

Open

175,873

176,420

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.67

09/19/18

Open

1,549,586

1,554,413

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

09/19/18

Open

2,522,630

2,530,576

Foreign Agency Obligations

Open/Demand

HSBC Securities (USA), Inc.

2.20

09/19/18

Open

3,381,000

3,389,678

Corporate Bonds

Open/Demand

HSBC Securities (USA), Inc.

2.20

09/19/18

Open

2,807,000

2,814,205

Capital Trusts

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

341,348

342,279

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

581,750

583,338

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

441,250

442,455

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

240,800

241,457

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

463,750

465,016

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

400,263

401,355

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

230,625

231,255

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

960,000

962,621

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

471,250

472,537

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

272,250

272,993

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

654,375

656,161

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

450,000

451,229

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

605,475

607,128

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

395,000

396,078

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

579,250

580,831

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

241,875

242,535

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

345,950

346,894

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

374,000

375,021

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.34

09/19/18

Open

94,628

94,886

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.45

09/19/18

Open

385,875

386,978

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

809,933

812,389

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

265,688

266,493

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

696,658

698,771

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

882,750

885,428

Corporate Bonds

Open/Demand

 

 

72		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

RBC Capital Markets, LLC

2.60

%

09/19/18

Open

$

560,298

$

561,997

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

208,098

208,729

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

71,775

71,993

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

63,990

64,184

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

168,100

168,610

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

1,885,438

1,891,157

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

165,430

165,932

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

287,200

288,071

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

379,500

380,651

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

684,125

686,200

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

244,110

244,850

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

633,955

635,878

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

1,220,625

1,224,328

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

21,803

21,869

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

346,040

347,090

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

460,750

462,148

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

201,825

202,437

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/19/18

Open

891,938

894,643

Corporate Bonds

Open/Demand

UBS Securities LLC

2.25

09/19/18

Open

3,860,000

3,870,133

Corporate Bonds

Open/Demand

UBS Securities LLC

2.25

09/19/18

Open

355,380

356,313

Corporate Bonds

Open/Demand

UBS Securities LLC

2.25

09/19/18

Open

4,950,000

4,962,994

Corporate Bonds

Open/Demand

UBS Securities LLC

2.25

09/19/18

Open

7,162,500

7,181,302

Capital Trusts

Open/Demand

UBS Securities LLC

2.30

09/19/18

Open

325,350

326,223

Corporate Bonds

Open/Demand

UBS Securities LLC

2.35

09/19/18

Open

376,950

377,983

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

396,031

397,186

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

406,100

407,284

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

3,738,700

3,749,605

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

946,943

949,704

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

152,625

153,070

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

410,320

411,517

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

1,831,253

1,836,594

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

417,410

418,627

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

348,446

349,463

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

498,550

500,004

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

654,881

656,791

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

511,523

513,014

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

270,593

271,382

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

134,365

134,757

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

363,810

364,871

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

322,763

323,704

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

252,079

252,814

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

757,485

759,694

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

466,715

468,076

Corporate Bonds

Open/Demand

UBS Securities LLC

2.50

09/19/18

Open

3,924,800

3,936,247

Capital Trusts

Open/Demand

UBS Securities LLC

2.60

09/19/18

Open

830,233

832,751

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

09/20/18

Open

335,000

336,032

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

09/20/18

Open

266,000

266,820

Corporate Bonds

Open/Demand

Deutsche Bank Securities, Inc.

2.95

09/20/18

Open

788,000

790,429

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.59

09/20/18

Open

2,307,500

2,314,194

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

459,103

460,570

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

145,230

145,694

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

363,800

364,963

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

202,880

203,529

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

804,000

806,571

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

118,793

119,172

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

151,810

152,295

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

135,725

136,159

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

756,000

758,417

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

172,890

173,443

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

1,068,930

1,072,348

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

118,538

118,916

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

310,545

311,538

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

141,930

142,384

Corporate Bonds

Open/Demand

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			73

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

RBC Capital Markets, LLC

2.85

%

09/20/18

Open

$

1,544,630

$

1,549,569

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

159,125

159,634

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

318,565

319,584

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

332,910

333,974

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

415,800

417,129

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

200,175

200,815

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

150,068

150,547

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

219,050

219,750

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

151,368

151,851

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

130,615

131,033

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

359,013

360,160

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

228,790

229,521

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

205,105

205,761

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

370,880

372,066

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

323,400

324,434

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

137,250

137,689

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

843,670

846,367

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/20/18

Open

350,960

352,082

Corporate Bonds

Open/Demand

UBS Ltd.

2.60

09/20/18

Open

3,410,731

3,420,665

Capital Trusts

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

283,511

284,385

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

3,468,400

3,479,094

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

273,700

274,544

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

320,744

321,733

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

768,400

770,769

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

379,225

380,394

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

355,260

356,355

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

279,650

280,512

Corporate Bonds

Open/Demand

UBS Ltd.

2.75

09/20/18

Open

405,350

406,600

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.75

09/24/18

Open

912,655

915,070

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

0.75

09/25/18

Open

283,125

283,269

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/25/18

Open

839,125

841,313

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.89

09/26/18

Open

559,860

561,301

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.92

09/26/18

Open

1,577,173

1,581,278

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.60

09/27/18

Open

811,665

813,658

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/27/18

Open

302,270

303,084

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

09/27/18

Open

389,610

390,659

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.80

09/28/18

Open

1,564,806

1,568,579

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.80

09/28/18

Open

208,880

209,384

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/01/18

Open

143,019

143,370

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.65

10/03/18

Open

234,650

235,134

Foreign Agency Obligations

Open/Demand

RBC Capital Markets, LLC

2.85

10/04/18

Open

145,700

146,011

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/04/18

Open

276,223

276,813

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/04/18

Open

250,920

251,456

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.70

10/09/18

Open

289,835

290,313

Corporate Bonds

Open/Demand

HSBC Securities (USA), Inc.

2.45

10/09/18

Open

2,545,000

2,548,984

Corporate Bonds

Open/Demand

HSBC Securities (USA), Inc.

2.70

10/09/18

Open

566,000

566,976

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/09/18

Open

254,312

254,748

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

2.29

10/10/18

11/13/18

4,146,000

4,151,538

U.S. Government Sponsored Agency Securities

Up to 30 Days

HSBC Securities (USA), Inc.

2.33

10/10/18

11/13/18

4,960,000

4,966,741

U.S. Government Sponsored Agency Securities

Up to 30 Days

HSBC Securities (USA), Inc.

2.33

10/10/18

11/13/18

10,586,000

10,600,388

U.S. Government Sponsored Agency Securities

Up to 30 Days

HSBC Securities (USA), Inc.

2.33

10/10/18

11/13/18

15,569,000

15,590,161

U.S. Government Sponsored Agency Securities

Up to 30 Days

BNP Paribas S.A.

2.55

10/12/18

Open

1,012,095

1,013,242

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

213,038

213,302

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

1,417,460

1,419,218

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

540,960

541,631

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

489,375

489,982

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

111,471

111,609

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

527,461

528,115

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

127,410

127,568

Corporate Bonds

Open/Demand

 

 

74		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Reverse Repurchase Agreements (continued)

 

Counterparty

Interest Rate

Trade Date

Maturity Date (a)

Face Value

Face Value Including Accrued Interest

Type of Non-Cash Underlying Collateral

Remaining Contractual Maturity of the Agreements (a)

BNP Paribas S.A.

2.79

%

10/12/18

Open

$

188,700

$

188,934

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

550,078

550,760

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.79

10/12/18

Open

1,061,524

1,062,840

Corporate Bonds

Open/Demand

Barclays Bank PLC

2.65

10/15/18

Open

669,800

669,935

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.65

10/15/18

Open

114,660

115,498

Corporate Bonds

Open/Demand

HSBC Securities (USA), Inc.

2.21

10/15/18

Open

2,696,625

2,699,427

U.S. Treasury Obligations

Open/Demand

HSBC Securities (USA), Inc.

2.26

10/15/18

Open

6,877,500

6,884,932

U.S. Treasury Obligations

Open/Demand

RBC Capital Markets, LLC

2.59

10/15/18

Open

630,487

631,258

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/15/18

Open

182,125

182,370

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

1.50

10/16/18

Open

175,175

175,284

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.89

10/16/18

Open

136,069

136,233

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.66

10/17/18

Open

370,470

370,881

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/17/18

Open

172,220

172,411

Corporate Bonds

Open/Demand

Barclays Capital, Inc.

2.80

10/18/18

Open

480,425

480,948

Corporate Bonds

Open/Demand

Credit Suisse Securities (USA) LLC

1.75

10/18/18

Open

637,583

638,016

Foreign Agency Obligations

Open/Demand

RBC Capital Markets, LLC

2.85

10/18/18

Open

800,022

800,909

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/18/18

Open

177,076

177,273

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/18/18

Open

347,650

348,008

Corporate Bonds

Open/Demand

UBS Securities LLC

2.58

10/18/18

Open

792,059

792,854

Capital Trusts

Open/Demand

BNP Paribas S.A.

2.79

10/22/18

Open

547,336

547,718

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.84

10/22/18

Open

470,000

470,334

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/22/18

Open

390,600

390,878

Corporate Bonds

Open/Demand

Royal Bank of Canada

2.35

10/23/18

11/26/18

4,824,000

4,826,519

U.S. Government Sponsored Agency Securities

Up to 30 Days

RBC Capital Markets, LLC

2.85

10/25/18

Open

137,175

137,240

Corporate Bonds

Open/Demand

BNP Paribas S.A.

2.28

10/29/18

Open

4,500,000

4,500,855

U.S. Government Sponsored Agency Securities

Open/Demand

RBC Capital Markets, LLC

2.85

10/30/18

Open

182,865

182,879

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/30/18

Open

78,030

78,036

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/30/18

Open

271,350

271,371

Corporate Bonds

Open/Demand

UBS Securities LLC

2.70

10/30/18

Open

2,272,148

2,272,318

Corporate Bonds

Open/Demand

RBC Capital Markets, LLC

2.85

10/31/18

Open

195,540

195,556

Corporate Bonds

Open/Demand

$

374,908,062

$

376,301,922

 

(a)

Certain agreements have no stated maturity and can be terminated by either party at any time.

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Description		Number of Contracts				Expiration Date				Notional Amount (000)				Value/ Unrealized Appreciation (Depreciation)
Long Contracts:
10-Year U.S. Treasury Note			12				12/19/18			$	1,421			$	(19,692	)
10-Year U.S. Ultra Long Treasury Note			13				12/19/18				1,626				(20,533	)
Ultra Long U.S. Treasury Bond			39				12/19/18				5,820				(64,023	)
Euro STOXX 600 Index			1				12/21/18				8				(670	)
															(104,918	)
Short Contracts:
Euro-Bobl Future			1				12/06/18				149				158
Euro Bund Futures			1				12/06/18				182				(624	)
Long Gilt Future			1				12/27/18				156				(436	)
2-Year U.S. Treasury Note			24				12/31/18				5,056				8,405
5-Year U.S. Treasury Note			15				12/31/18				1,686				(956	)
															6,547
														$	(98,371	)

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			75

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Forward Foreign Currency Exchange Contracts

 

Currency Purchased						Currency Sold						Counterparty		Settlement Date				Unrealized Appreciation (Depreciation)
EUR			11,000			USD			12,452			JPMorgan Chase Bank N.A.			11/05/18			$	10
EUR			765,000			USD			865,980			JPMorgan Chase Bank N.A.			11/05/18				697
GBP			176,000			USD			224,611			BNP Paribas S.A.			11/05/18				380
GBP			173,000			USD			220,644			Barclays Bank PLC			11/05/18				512
GBP			1,362,000			USD			1,737,095			Barclays Bank PLC			11/05/18				4,030
GBP			1,958,000			USD			2,500,758			Citibank N.A.			11/05/18				2,269
GBP			10,962,000			USD			14,000,666			Citibank N.A.			11/05/18				12,703
GBP			93,000			USD			118,660			Deutsche Bank AG			11/05/18				227
GBP			303,000			USD			386,603			Deutsche Bank AG			11/05/18				740
USD			1,439,669			EUR			1,222,000			BNP Paribas S.A.			11/05/18				55,251
USD			4,430,353			EUR			3,760,774			Citibank N.A.			11/05/18				169,729
USD			16,927,038			EUR			14,368,778			Citibank N.A.			11/05/18				648,482
USD			739,474			EUR			650,000			Deutsche Bank AG			11/05/18				3,082
USD			1,043,228			EUR			917,000			Deutsche Bank AG			11/05/18				4,348
USD			625,106			EUR			531,000			JPMorgan Chase Bank N.A.			11/05/18				23,530
USD			12,770			EUR			11,000			UBS AG			11/05/18				308
USD			797,536			EUR			687,000			UBS AG			11/05/18				19,225
USD			232,273			GBP			176,000			BNP Paribas S.A.			11/05/18				7,282
USD			676,685			GBP			518,000			Citibank N.A.			11/05/18				14,495
USD			1,784,462			GBP			1,366,000			Citibank N.A.			11/05/18				38,224
USD			2,584,266			GBP			1,958,000			Citibank N.A.			11/05/18				81,240
USD			14,468,196			GBP			10,962,000			Citibank N.A.			11/05/18				454,826
USD			122,715			GBP			93,000			Deutsche Bank AG			11/05/18				3,827
USD			399,812			GBP			303,000			Deutsche Bank AG			11/05/18				12,470
USD			1,673,260			MXN			31,843,000			Goldman Sachs International			11/05/18				105,663
ZAR			16,314,373			USD			1,098,500			BNP Paribas S.A.			11/13/18				5,916
USD			1,392,515			EUR			1,222,000			BNP Paribas S.A.			12/05/18				4,789
USD			4,288,956			EUR			3,760,774			Citibank N.A.			12/05/18				18,150
USD			16,386,801			EUR			14,368,778			Citibank N.A.			12/05/18				69,346
																			1,761,751
EUR			1,222,000			USD			1,389,292			BNP Paribas S.A.			11/05/18				(4,874	)
EUR			3,760,774			USD			4,279,009			Citibank N.A.			11/05/18				(18,384	)
EUR			14,368,778			USD			16,348,796			Citibank N.A.			11/05/18				(70,239	)
EUR			650,000			USD			765,838			Deutsche Bank AG			11/05/18				(29,446	)
EUR			917,000			USD			1,080,421			Deutsche Bank AG			11/05/18				(41,541	)
IDR			16,628,547,540			USD			1,091,828			JPMorgan Chase Bank N.A.			11/13/18				(143	)
USD			1,076,769			IDR			16,628,547,540			Bank of America N.A.			11/13/18				(14,916	)
USD			1,098,500			ZAR			17,175,840			Bank of America N.A.			11/13/18				(64,234	)
EUR			650,000			USD			741,196			Deutsche Bank AG			12/05/18				(3,043	)
EUR			917,000			USD			1,045,656			Deutsche Bank AG			12/05/18				(4,294	)
USD			12,481			EUR			11,000			JPMorgan Chase Bank N.A.			12/05/18				(11	)
USD			867,985			EUR			765,000			JPMorgan Chase Bank N.A.			12/05/18				(763	)
USD			224,904			GBP			176,000			BNP Paribas S.A.			12/05/18				(389	)
USD			220,926			GBP			173,000			Barclays Bank PLC			12/05/18				(527	)
USD			1,739,314			GBP			1,362,000			Barclays Bank PLC			12/05/18				(4,145	)
USD			2,504,008			GBP			1,958,000			Citibank N.A.			12/05/18				(2,373	)
USD			14,018,863			GBP			10,962,000			Citibank N.A.			12/05/18				(13,286	)
USD			118,814			GBP			93,000			Deutsche Bank AG			12/05/18				(233	)
USD			387,103			GBP			303,000			Deutsche Bank AG			12/05/18				(758	)
USD			1,406,438			RUB			93,756,000			Bank of America N.A.			12/19/18				(8,841	)
USD			1,079,145			IDR			16,628,547,540			JPMorgan Chase Bank N.A.			01/11/19				(663	)
																			(283,103	)
			Net Unrealized Appreciation															$	1,478,648

 

 

76		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Centrally Cleared Credit Default Swaps — Sell Protection

 

Reference Obligation/Index		Financing Rate Received by the Trust				Payment Frequency				Termination Date				Credit Rating(a)				Notional Amount (000)(b)								Value				Upfront Premium Paid (Received)				Unrealized Appreciation (Depreciation)
Chesapeake Energy Corp.			5.00	%			Quarterly				12/20/21				CCC+				USD				319			$	22,572			$	(8,425	)		$	30,997

 

(a)

Using Standard & Poor’s (“S&P”) rating of the issuer or the underlying securities of the index, as applicable.

(b)

The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

Centrally Cleared Interest Rate Swaps

 

Paid by the Trust				Received by the Trust				Termination Date				Notional Amount (000)						Value				Upfront Premium Paid (Received)				Unrealized Appreciation (Depreciation)
Rate		Frequency		Rate		Frequency
1.50%		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			02/02/19			USD			8,000			$	40,670			$	14			$	40,656
1.62		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			04/04/19			USD			7,600				38,061				—				38,061
3-Month LIBOR, 2.56%		Quarterly		2.39%		Semi-annual			02/12/20			USD			193,500				(1,452,436	)			1,718				(1,454,154	)
3-Month LIBOR, 2.56%		Quarterly		2.36%		Semi-annual			02/13/20			USD			150,000				(1,183,299	)			1,333				(1,184,632	)
2.01		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			02/02/22			USD			15,000				531,680				140				531,540
2.01		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			07/12/22			USD			3,000				102,970				—				102,970
1.46		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			06/28/26			USD			1,427				163,294				16				163,278
1.46		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			06/28/26			USD			357				40,802				4				40,798
2.47		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			12/29/26			USD			3,000				136,107				41				136,066
2.25		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			01/19/27			USD			3,400				218,841				45				218,796
2.42		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			04/04/27			USD			18,300				1,080,037				247				1,079,790
2.30		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			05/02/27			USD			3,000				190,086				—				190,086
2.28		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			05/17/27			USD			1,700				110,636				—				110,636
2.18		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			06/05/27			USD			2,300				168,960				—				168,960
2.90		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			02/06/28			USD			57,000				1,479,411				942				1,478,469
2.92		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			03/26/28			USD			10,500				268,180				176				268,004
2.70		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			04/04/47			USD			13,200				1,587,497				—				1,587,497
3.01		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			02/13/48			USD			18,000				1,103,877				433				1,103,444
2.98		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			02/13/48			USD			9,000				599,804				216				599,588
3.01		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			02/14/48			USD			6,500				399,714				156				399,558
3.03		Semi-annual		3-Month LIBOR, 2.56%		Quarterly			02/20/48			USD			4,300				242,916				103				242,813
																		$	5,867,808			$	5,584			$	5,862,224

OTC Credit Default Swaps — Buy Protection

 

Reference Obligation/Index		Financing Rate Paid by the Trust				Payment Frequency				Counterparty				Termination Date				Notional Amount (000)								Value				Upfront Premium Paid (Received)				Unrealized Appreciation (Depreciation)
United Mexican States			1.00	%			Quarterly				Citibank N.A.				06/20/20				USD				604			$	(2,940	)		$	1,962			$	(4,902	)
United Mexican States			1.00				Quarterly				Bank of America N.A.				09/20/20				USD				604				(3,022	)			2,930				(5,952	)
Republic of Colombia			1.00				Quarterly				Citibank N.A.				12/20/23				USD				511				5,910				4,041				1,869
CMBX NA.7			3.00				Monthly				Deutsche Bank AG				01/17/47				USD				25,000				1,488,050				1,865,272				(377,222	)
																										$	1,487,998			$	1,874,205				$        (386,207	)

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			77

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

OTC Credit Default Swaps — Sell Protection

 

Reference Obligation/Index		Financing Rate Received by the Trust				Payment Frequency				Counterparty				Termination Date				Credit Rating(a)		Notional Amount (000)(b)								Value				Upfront Premium Paid (Received)				Unrealized Appreciation (Depreciation)
United Mexican States			1.00	%			Quarterly				Bank of America N.A.				06/20/20			BBB+			USD				604			$	2,941			$	(2,056	)		$	4,997
United Mexican States			1.00				Quarterly				Citibank N.A.				09/20/20			BBB+			USD				604				3,022				2,778				244
Casino Guichard Perrachon SA			1.00				Quarterly				JPMorgan Chase Bank N.A.				12/20/22			BB			EUR				50				(7,638	)			(1,821	)			(5,817	)
Telecom Italia SpA/Milano			1.00				Quarterly				Citibank N.A.				12/20/22			BB+			EUR				30				(1,635	)			(522	)			(1,113	)
Casino Guichard Perrachon SA			1.00				Quarterly				BNP Paribas S.A.				06/20/23			BB			EUR				10				(1,732	)			(950	)			(782	)
Casino Guichard Perrachon SA			1.00				Quarterly				BNP Paribas S.A.				06/20/23			BB			EUR				10				(1,732	)			(950	)			(782	)
Casino Guichard Perrachon SA			1.00				Quarterly				JPMorgan Chase Bank N.A.				06/20/23			BB			EUR				10				(1,731	)			(940	)			(791	)
Casino Guichard Perrachon SA			1.00				Quarterly				Bank of America N.A.				06/20/23			BB			EUR				12				(2,135	)			(1,793	)			(342	)
Casino Guichard Perrachon SA			1.00				Quarterly				Citibank N.A.				06/20/23			BB			EUR				28				(4,790	)			(3,793	)			(997	)
Casino Guichard Perrachon SA			1.00				Quarterly				JPMorgan Chase Bank N.A.				06/20/23			BB			EUR				7				(1,256	)			(903	)			(353	)
Casino Guichard Perrachon SA			1.00				Quarterly				Citibank N.A.				06/20/23			BB			EUR				12				(2,092	)			(1,607	)			(485	)
Casino Guichard Perrachon SA			1.00				Quarterly				JPMorgan Chase Bank N.A.				06/20/23			BB			EUR				12				(2,094	)			(1,608	)			(486	)
Casino Guichard Perrachon SA			1.00				Quarterly				JPMorgan Chase Bank N.A.				06/20/23			BB			EUR				5				(838	)			(602	)			(236	)
Casino Guichard Perrachon SA			1.00				Quarterly				Barclays Bank PLC				06/20/23			BB			EUR				13				(2,242	)			(1,550	)			(692	)
Casino Guichard Perrachon SA			1.00				Quarterly				Barclays Bank PLC				06/20/23			BB			EUR				47				(8,146	)			(5,800	)			(2,346	)
Intrum Justitia AB			5.00				Quarterly				Credit Suisse International				06/20/23			BB+			EUR				20				999				1,892				(893	)
Intrum Justitia AB			5.00				Quarterly				Credit Suisse International				06/20/23			BB+			EUR				50				2,499				5,010				(2,511	)
Intrum Justitia AB			5.00				Quarterly				Credit Suisse International				06/20/23			BB+			EUR				7				342				767				(425	)
Intrum Justitia AB			5.00				Quarterly				Morgan Stanley & Co. International PLC				06/20/23			BB+			EUR				23				1,156				2,587				(1,431	)
Intrum Justitia AB			5.00				Quarterly				Citibank N.A.				06/20/23			BB+			EUR				9				466				440				26
Intrum Justitia AB			5.00				Quarterly				Citibank N.A.				06/20/23			BB+			EUR				21				1,033				975				58
Thomas Cook Finance 2 PLC			5.00				Quarterly				Citibank N.A.				06/20/23			B+			EUR				50				3,352				6,350				(2,998	)
Thomas Cook Finance 2 PLC			5.00				Quarterly				Morgan Stanley & Co. International PLC				06/20/23			B+			EUR				60				4,023				7,603				(3,580	)
Casino Guichard-Perrachon SA			1.00				Quarterly				Barclays Bank PLC				12/20/23			BB			EUR				80				(15,498	)			(13,015	)			(2,483	)
Chesapeake Energy Corp.			5.00				Quarterly				Barclays Bank PLC				12/20/23			B-			USD				94				553				185				368
Garfunkelux Holdco 2 SA			5.00				Quarterly				JPMorgan Chase Bank N.A.				12/20/23			B-			EUR				13				(222	)			(94	)			(128	)
Garfunkelux Holdco 2 SA			5.00				Quarterly				Credit Suisse International				12/20/23			B-			EUR				6				(97	)			110				(207	)
Garfunkelux Holdco 2 SA			5.00				Quarterly				Credit Suisse International				12/20/23			B-			EUR				24				(423	)			481				(904	)
Vougeot Bidco PLC			5.00				Quarterly				Citibank N.A.				12/20/23			B			EUR				15				1,605				1,577				28
Vougeot Bidco PLC			5.00				Quarterly				Citibank N.A.				12/20/23			B			EUR				36				3,744				3,638				106
CMBX NA.7			3.00				Monthly				Barclays Bank PLC				01/17/47			BBB-			USD				10,000				(616,053	)			(519,062	)			(96,991	)
CMBX NA.7			3.00				Monthly				Barclays Bank PLC				01/17/47			BBB-			USD				5,000				(308,026	)			(259,167	)			(48,859	)
CMBX NA.7			3.00				Monthly				Barclays Bank PLC				01/17/47			BBB-			USD				10,000				(616,054	)			(251,341	)			(364,713	)
CMBX NA.8			2.00				Monthly				Morgan Stanley & Co. International PLC				10/17/57			A			USD				5,000				(69,050	)			(562,531	)			493,481
CMBX NA.9			2.00				Monthly				Morgan Stanley & Co. International PLC				09/17/58			A			USD				2,500				(27,318	)			(344,317	)			316,999
CMBX NA.9			2.00				Monthly				Credit Suisse International				09/17/58			A			USD				2,500				(27,319	)			(347,675	)			320,356
CMBX NA.9			2.00				Monthly				Morgan Stanley & Co. International PLC				09/17/58			BBB-			USD				5,000				(54,637	)			(682,222	)			627,585
CMBX NA.9			3.00				Monthly				Morgan Stanley & Co. International PLC				09/17/58			BBB-			USD				2,500				(191,882	)			(556,480	)			364,598
CMBX NA.9			3.00				Monthly				Deutsche Bank AG				09/17/58			BBB-			USD				25,000				(1,918,817	)			(2,481,704	)			562,887
CMBX NA.9			3.00				Monthly				Goldman Sachs International				09/17/58			BBB-			USD				5,000				(383,764	)			(532,556	)			148,792
CMBX NA.9			3.00				Monthly				Credit Suisse International				09/17/58			BBB-			USD				5,000				(383,763	)			(548,102	)			164,339
CMBX NA.9			3.00				Monthly				Morgan Stanley & Co. International PLC				09/17/58			BBB-			USD				5,000				(383,764	)			(547,468	)			163,704
																												$	(5,009,013	)		$	(7,636,236	)		$	2,627,223

 

(a)

Using S&P’s rating of the issuer or the underlying securities of the index, as applicable.

(b)

The maximum potential amount the Trust may pay should a negative credit event take place as defined under the terms of the agreement.

OTC Interest Rate Swaps

 

Paid by the Trust

Received by the Trust

Counterparty

Termination Date

Notional Amount (000)

Value

Upfront Premium Paid (Received)

Unrealized Appreciation (Depreciation)

Rate

Frequency

Rate

Frequency

MXIBTIIE 28-day

Monthly

6.26%

Monthly

Bank of America N.A.

06/15/26

MXN

38,640

$

(288,061

)

$

—

$

(288,061

)

 

 

 

78		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Balances Reported in the Statements of Assets and Liabilities for Centrally Cleared Swaps and OTC Swaps

 

		Swap Premiums Paid				Swap Premiums Received				Unrealized Appreciation				Unrealized Depreciation
Centrally Cleared Swaps(a)		$	5,584			$	(8,425	)		$	8,532,007			$	(2,638,786	)
OTC Swaps		$	1,908,598			$	(7,670,629	)		$	3,170,437			$	(1,217,482	)

 

(a)

Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Consolidated Statements of Assets and Liabilities and is net of any previously paid (received) swap premium amounts

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Consolidated Statement of Assets and Liabilities were as follows:

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Assets — Derivative Financial Instruments
Futures contracts
Net unrealized appreciation(a)		$	—			$	—			$	—			$	—			$	8,563			$	—			$	8,563
Forward foreign currency exchange contracts
Unrealized appreciation on forward foreign currency exchange contracts			—				—				—				1,761,751				—				—				1,761,751
Swaps — centrally cleared
Net unrealized appreciation(a)			—				30,997				—				—				8,501,010				—				8,532,007
Swaps — OTC
Unrealized appreciation on OTC swaps; Swap premiums paid			—				5,079,035				—				—				—				—				5,079,035
		$	—			$	5,110,032			$	—			$	1,761,751			$	8,509,573			$	—			$	15,381,356
Liabilities — Derivative Financial Instruments
Futures contracts
Net unrealized depreciation(a)		$	—			$	—			$	670			$	—			$	106,264			$	—			$	106,934
Forward foreign currency exchange contracts
Unrealized depreciation on forward foreign currency exchange contracts			—				—				—				283,103				—				—				283,103
Swaps — centrally cleared
Net unrealized depreciation(a)			—				—				—				—				2,638,786				—				2,638,786
Swaps — OTC
Unrealized depreciation on OTC swaps; Swap premiums received			—				8,600,050				—				—				288,061				—				8,888,111
		$	—			$	8,600,050			$	670			$	283,103			$	3,033,111			$	—			$	11,916,934

 

(a)

Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Consolidated Schedule of Investments. Only current day’s variation margin is reported within the Consolidated Statement of Assets and Liabilities.

For the year ended October 31, 2018, the effect of derivative financial instruments in the Consolidated Statement of Operations was as follows:

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Net Realized Gain (Loss) from:
Futures contracts		$	—			$	—			$	(1,617	)		$	—			$	1,549,253			$	—			$	1,547,636
Forward foreign currency exchange contracts			—				—				—				1,488,235				—				—				1,488,235
Options purchased(a)			—				—				—				(72,378	)			(1,662	)			—				(74,040	)
Options written			—				—				—				37,307				—				—				37,307
Swaps			—				3,401,408				—				—				(162,864	)			—				3,238,544
		$	—			$	3,401,408			$	(1,617	)		$	1,453,164			$	1,384,727			$	—			$	6,237,682

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			79

---

Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

		Commodity Contracts				Credit Contracts				Equity Contracts				Foreign Currency Exchange Contracts				Interest Rate Contracts				Other Contracts				Total
Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts		$	—			$	—			$	(670	)		$	—			$	(146,738	)		$	—			$	(147,408	)
Forward foreign currency exchange contracts			—				—				—				340,615				—				—				340,615
Options purchased(b)			—				—				—				(9,100	)			—				—				(9,100	)
Options written			—				—				—				31,954				—				—				31,954
Swaps			—				2,339,307				—				—				6,024,682				—				8,363,989
		$	—			$	2,339,307			$	(670	)		$	363,469			$	5,877,944			$	—			$	8,580,050

 

(a)

Options purchased are included in net realized gain (loss) from investments.

(b)

Options purchased are included in net change in unrealized appreciation (depreciation) on investments.

Average Quarterly Balances of Outstanding Derivative Financial Instruments

 

Futures contracts:
Average notional value of contracts — long		$	3,179,417
Average notional value of contracts — short		$	25,593,435
Forward foreign currency exchange contracts:
Average amounts purchased — in USD		$	112,159,563
Average amounts sold — in USD		$	65,060,156
Options:
Average value of option contracts purchased		$	—	(a)
Average value of option contracts written		$	6,327
Credit default swaps:
Average notional value — buy protection		$	26,932,365
Average notional value — sell protection		$	99,648,411
Interest rate swaps:
Average notional value — pays fixed rate		$	161,858,386
Average notional value — receives fixed rate		$	259,654,428

 

(a)

The risk exposure table serves as an indicator of the volume of activity.

For more information about the Trust’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

 

		Assets				Liabilities
Futures contracts		$	7,199			$	56,529
Forward foreign currency exchange contracts			1,761,751				283,103
Swaps — Centrally cleared			738,900				—
Swaps — OTC(a)			5,079,035				8,888,111
Total derivative assets and liabilities in the Consolidated Statement of Assets and Liabilities		$	7,586,885			$	9,227,743
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)			(746,099	)			(56,529	)
Total derivative assets and liabilities subject to an MNA		$	6,840,786			$	9,171,214

 

(a)

Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Consolidated Statement of Assets and Liabilities.

The following table presents the Trust’s derivative assets (and liabilities) by counterparty net of amounts available for offset under an MNA and net of the related collateral received (and pledged) by the Trust:

 

Counterparty		Derivative Assets Subject to an MNA by Counterparty				Derivatives Available for Offset (a)				Non-cash Collateral Received				Cash Collateral Received (b)				Net Amount of Derivative Assets (c)(d)
Bank of America N.A.		$	7,927			$	(7,927	)		$	—			$	—			$	—
Barclays Bank PLC			5,095				(5,095	)			—				—				—
BNP Paribas S.A.			73,618				(8,727	)			—				—				64,891
Citibank N.A.			1,533,556				(120,699	)			—				(1,360,000	)			52,857
Credit Suisse International			492,955				(492,955	)			—				—				—
Deutsche Bank AG			2,452,853				(2,452,853	)			—				—				—
Goldman Sachs International			254,455				(254,455	)			—				—				—

 

 

80		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

Counterparty		Derivative Assets Subject to an MNA by Counterparty				Derivatives Available for Offset (a)				Non-cash Collateral Received				Cash Collateral Received (b)				Net Amount of Derivative Assets (c)(d)
JPMorgan Chase Bank N.A.		$	24,237			$	(15,359	)		$	—			$	—			$	8,878
Morgan Stanley & Co. International PLC			1,976,557				(1,976,557	)			—				—				—
UBS AG			19,533				—				—				—				19,533
		$	6,840,786			$	(5,334,627	)		$	—			$	(1,360,000	)		$	146,159
Counterparty		Derivative Liabilities Subject to an MNA by Counterparty				Derivatives Available for Offset (a)				Non-cash Collateral Pledged				Cash Collateral Pledged (e)				Net Amount of Derivative Liabilities (d)(f)
Bank of America N.A.		$	386,195			$	(7,927	)		$	—			$	—			$	378,268
Barclays Bank PLC			1,570,691				(5,095	)			—				(1,530,000	)			35,596
BNP Paribas S.A.			8,727				(8,727	)			—				—				—
Citibank N.A.			120,699				(120,699	)			—				—				—
Credit Suisse International			900,717				(492,955	)			—				(310,000	)			97,762
Deutsche Bank AG			2,938,241				(2,452,853	)			—				(440,000	)			45,388
Goldman Sachs International			532,556				(254,455	)			—				(278,101	)			—
JPMorgan Chase Bank N.A.			15,359				(15,359	)			—				—				—
Morgan Stanley & Co. International PLC			2,698,029				(1,976,557	)			—				(630,000	)			91,472
		$	9,171,214			$	(5,334,627	)		$	—			$	(3,188,101	)		$	648,486

 

(a)

The amount of derivatives available for offset is limited to the amount of derivative asset and/or liabilities that are subject to an MNA.

(b)

Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

(c)

Net amount represents the net amount receivable from the counterparty in the event of default.

(d)

Net amount may also include forward foreign currency exchange contracts and currency options that are not required to be collateralized.

(e)

Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes.

(f)

Net amount represents the net amount payable due to counterparty in the event of default.

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

		Level 1				Level 2				Level 3				Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		$	—			$	162,488,929			$	3,692,359			$	166,181,288
Common Stocks			3,185,987				—				—				3,185,987
Corporate Bonds			107,186				451,847,459				1,798,304				453,752,949
Floating Rate Loan Interests			—				40,571,515				66,230,887				106,802,402
Foreign Agency Obligations			—				36,704,560				—				36,704,560
Non-Agency Mortgage-Backed Securities			—				100,948,960				17,447,723				118,396,683
Preferred Securities			17,195,061				94,594,168				1,637,441				113,426,670
U.S. Government Sponsored Agency Securities			—				67,721,995				—				67,721,995
U.S. Treasury Obligations			—				19,032,559				—				19,032,559
Short-Term Securities			—				2,072,629				—				2,072,629
Unfunded Floating Rate Loan Interests(a)			—				16				—				16
Liabilities:
Unfunded Floating Rate Loan Interests(a)			—				—				(60	)			(60	)
		$	20,488,234			$	975,982,790			$	90,806,654			$	1,087,277,678

 

 

CONSOLIDATED SCHEDULES OF INVESTMENTS			81

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Consolidated Schedule of Investments  (continued) October 31, 2018		BlackRock Multi-Sector Income Trust (BIT)

 

		Level 1				Level 2				Level 3				Total
Derivative Financial Instruments(b)
Assets:
Credit contracts		$	—			$	3,201,434			$	—			$	3,201,434
Foreign currency exchange contracts			—				1,761,751				—				1,761,751
Interest rate contracts			8,563				8,501,010				—				8,509,573
Liabilities:
Credit contracts			—				(929,421	)			—				(929,421	)
Equity contracts			(670	)			—				—				(670	)
Foreign currency exchange contracts			—				(283,103	)			—				(283,103	)
Interest rate contracts			(106,264	)			(2,926,847	)			—				(3,033,111	)
		$	(98,371	)		$	9,324,824			$	—			$	9,226,453

 

(a)

Unfunded floating rate loan interests are valued at the unrealized appreciation (depreciation) on the commitment.

(b)

Derivative financial instruments are swaps, futures contracts and forward foreign currency exchange contracts. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument are shown at value.

The Trust may hold assets and/or liabilities in which the fair value approximates the carrying amount or face value, including accrued interest, for financial statement purposes. As of period end, reverse repurchase agreements payable of $376,301,922 is categorized as Level 2 within the disclosure hierarchy.

During the year ended October 31, 2018, there were no transfers between Level 1 and Level 2.

A reconciliation of Level 3 investments is presented when the Trust had a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

		Asset- Backed Securities				Corporate Bonds				Floating Rate Loan Interests				Non-Agency Mortgage- Backed Securities				Preferred Securities				Unfunded Floating Rate Loan Interests				Total
Assets:
Opening balance, as of October 31, 2017		$	3,678,179			$	—			$	89,614,421			$	16,674,165			$	1,707,834			$	—			$	111,674,599
Transfers into Level 3(a)			—				—				264,852				10,658,935				—				—				10,923,787
Transfers out of Level 3(b)			—				—				(311,782	)			—				—				—				(311,782	)
Accrued discounts/premiums			27,750				—				15,409				188,797				—				—				231,956
Net realized gain (loss)			6,705				—				12,873				967,794				—				—				987,372
Net change in unrealized appreciation (depreciation)(c)(d)			(143,352	)			(47,696	)			(110,813	)			(1,000,550	)			(70,393	)			(60	)			(1,372,864	)
Purchases			2,182,650				1,846,000				2,474,795				—				—				—				6,503,445
Sales			(2,059,573	)			—				(25,728,868	)			(10,041,418	)			—				—				(37,829,859	)
Closing Balance, as of October 31, 2018		$	3,692,359			$	1,798,304			$	66,230,887			$	17,447,723			$	1,637,441			$	(60	)		$	90,806,654
Net change in unrealized appreciation (depreciation) on investments still held at October 31, 2018(d)		$	(132,477	)		$	(47,696	)		$	(216,744	)		$	(989,004	)		$	(70,393	)		$	(60	)		$	(1,456,374	)

 

(a)

As of October 31, 2017, the Trust used observable inputs in determining the value of certain investments. As of October 31, 2018, the Trust used significant unobservable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 2 to Level 3 in the disclosure hierarchy.

(b)

As of October 31, 2017, the Trust used significant unobservable inputs in determining the value of certain investments. As of October 31, 2018, the Trust used observable inputs in determining the value of the same investments. As a result, investments at beginning of period value were transferred from Level 3 to Level 2 in the disclosure hierarchy.

(c)

Included in the related net change in unrealized appreciation (depreciation) in the Consolidated Statement of Operations.

(d)

Any difference between net change in unrealized appreciation (depreciation) and net change in unrealized appreciation (depreciation) on investments still held at October 31, 2018 is generally due to investments no longer held or categorized as Level 3 at period end.

The following table summarizes the valuation methodologies used and unobservable inputs utilized by the BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) to determine the value of certain of the Trust’s Level 3 investments as of period end. The table does not include Level 3 investments with values based upon unadjusted third party pricing information in the amount of $24,432,580. A significant change in the third party information could result in a significantly lower or higher value of such Level 3 investments.

 

Value

Valuation Approaches

Unobservable Inputs

Range of Unobservable Inputs Utilized

Assets:

Floating Rate Loan Interests

$

63,083,736

Income

Discount Rate

(a)

15%

Corporate Bond

1,652,897

Income

Credit Spread

(a)

310

Preferred Securities

1,637,441

Market

Illiquidity Discount

(a)

1

%

$

66,374,074

 

(a)

Decrease in unobservable input may result in a significant increase to value, while an increase in unobservable input may result in a significant decrease to value

See notes to financial statements.

 

 

82		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Statements of Assets and Liabilities

October 31, 2018

 

		BTZ				BGT				BIT (a)
ASSETS
Investments at value — unaffiliated(b)		$	2,108,870,084			$	490,504,523			$	1,087,277,722
Investments at value — affiliated(c)			7,903,560				282,908				—
Cash			69,768				793,986				—
Cash Pledged:
Centrally cleared swaps			2,011,000				—				6,565,590
Futures contracts			3,774,000				—				156,329
Collateral — OTC derivatives			—				—				3,320,000
Collateral — reverse repurchase agreements			—				—				2,953,000
Foreign currency at value(d)			24,305				1,182,426				6,512,846
Receivables:
Interest — unaffiliated			27,338,850				1,248,212				11,139,012
Investments sold			10,090,211				11,157,048				11,992,018
Variation margin on futures contracts			1,262,251				—				7,199
Variation margin on centrally cleared swaps			—				—				738,900
Dividends — unaffiliated			55,842				—				141,403
Dividends — affiliated			22,696				2,384				12,877
Reverse repurchase agreements			—				—				5,722,088
Swap premiums paid			98,900				—				1,908,598
Unrealized appreciation on:
OTC swaps			257,774				10,889				3,170,437
Forward foreign currency exchange contracts			—				108,576				1,761,751
Prepaid expenses			87,100				2,703				3,768
Total assets			2,161,866,341				505,293,655				1,143,383,538
LIABILITIES
Bank overdraft			—				—				220,196
Cash Received:
Collateral — OTC derivatives			670,000				—				1,360,000
Collateral — reverse repurchase agreements			—				—				145,000
Options written at value(e)			10,964				—				—
Reverse repurchase agreements at value			707,102,433				—				376,301,922
Payables:
Investments purchased			2,211,551				22,713,951				35,551,845
Reverse repurchase agreements			7,979,458				—				7,700,401
Investment advisory fees			1,144,191				306,665				758,122
Variation margin on centrally cleared swaps			992				—				—
Trustees’ and Officer’s fees			794,882				230,359				111,285
Capital shares redeemed			520,521				—				—
Other accrued expenses			478,975				321,143				586,274
Due to counterparty			—				212,836				306,330
Income dividend distributions			236,517				27,530				158,149
Variation margin on futures contracts			150,844				—				56,529
Bank borrowings			—				142,000,000				—
Principal paydowns			—				—				118,420
Swaps			—				—				6,277
Interest expense			—				367,366				—
Swap premiums received			224,817				—				7,670,629
Unrealized depreciation on:
OTC swaps			386,641				8,389				1,217,482
Forward foreign currency exchange contracts			—				8,811				283,103
Unfunded floating rate loan interests			—				814				44
Total liabilities			721,912,786				166,197,864				432,552,008
NET ASSETS		$	1,439,953,555			$	339,095,791			$	710,831,530

See notes to financial statements.

 

 

FINANCIAL STATEMENTS			83

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Statements of Assets and Liabilities  (continued)

October 31, 2018

 

		BTZ				BGT				BIT (a)
NET ASSETS CONSIST OF
Paid-in capital(f)(g)(h)		$	1,464,856,165			$	351,383,005			$	715,876,112
Accumulated loss			(24,902,610	)			(12,287,214	)			(5,044,582	)
NET ASSETS		$	1,439,953,555			$	339,095,791			$	710,831,530
Net asset value		$	13.72			$	14.33			$	18.79
(a) Consolidated Statement of Assets and Liabilities
(b) Investments at cost — unaffiliated		$	2,097,561,846			$	494,471,516			$	1,099,183,412
(c) Investments at cost — affiliated		$	7,903,560			$	282,908			$	—
(d) Foreign currency at cost		$	25,470			$	1,182,459			$	6,887,093
(e) Premiums received		$	64,068			$	—			$	—
(f)  Par Value		$	0.001			$	0.001			$	0.001
(g) Shares outstanding			104,922,963				23,667,022				37,821,680
(h) Shares authorized.			Unlimited				Unlimited				Unlimited

See notes to financial statements.

 

 

84		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Statements of Operations

Year Ended October 31, 2018

 

		BTZ				BGT				BIT (a)
INVESTMENT INCOME
Interest — unaffiliated		$	109,158,059			$	25,254,659			$	71,100,763
Dividends — unaffiliated			5,180,372				117,945				2,288,677
Dividends — affiliated			137,025				88,252				111,086
Other income			—				319,605				78,143
Foreign taxes withheld			—				—				(62,555	)
Total investment income			114,475,456				25,780,461				73,516,114
EXPENSES
Investment advisory			13,438,301				3,640,286				9,586,536
Accounting services			183,490				58,983				117,162
Transfer agent			128,096				38,402				67,152
Professional			110,748				150,664				176,251
Trustees and Officer			103,854				20,192				63,715
Custodian			95,878				170,565				160,974
Registration			41,495				9,431				14,757
Printing			33,894				21,003				29,775
Miscellaneous			117,337				29,649				178,933
Total expenses excluding interest expense			14,253,093				4,139,175				10,395,255
Interest expense			13,493,211				3,683,013				10,745,930
Total expenses			27,746,304				7,822,188				21,141,185
Less fees waived and/or reimbursed by the Manager			(6,500	)			(9,747	)			(5,065	)
Total expenses after fees waived and/or reimbursed			27,739,804				7,812,441				21,136,120
Net investment income			86,735,652				17,968,020				52,379,994
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments			(7,388,668	)			(736,340	)			(584,830	)
Investments — affiliated			—				(42,986	)			—
Futures contracts			10,634,400				—				1,547,636
Forward foreign currency exchange contracts			—				100,014				1,488,235
Foreign currency transactions			2,492				62,217				(265,350	)
Capital gain distributions from investment companies — affiliated			32				8				—
Options written			120,877				—				37,307
Payment from affiliate(b)			—				—				1,943
Swaps			(173,742	)			(7,224	)			3,238,544
			3,195,391				(624,311	)			5,463,485
Net change in unrealized appreciation (depreciation) on:
Investments			(135,758,772	)			(4,371,957	)			(57,049,229	)
Investments — affiliated			—				(1,767	)			—
Futures contracts			5,009,796				—				(147,408	)
Forward foreign currency exchange contracts			—				91,222				340,615
Foreign currency translations			(3,516	)			(4,732	)			(356,300	)
Options written			53,104				—				31,954
Swaps			(706,547	)			39,237				8,363,989
Unfunded floating rate loan interests			—				(814	)			(44	)
			(131,405,935	)			(4,248,811	)			(48,816,423	)
Net realized and unrealized loss			(128,210,544	)			(4,873,122	)			(43,352,938	)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		$	(41,474,892	)		$	13,094,898			$	9,027,056

 

(a)	Consolidated Statement of Operations.

(b)	See Note 6 of the Notes to Financial Statements.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS			85

---

Statements of Changes in Net Assets

 

		BTZ												BGT
		Year Ended October 31,												Year Ended October 31,
		2018				2017								2018				2017
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income		$	86,735,652			$	86,831,951							$	17,968,020			$	17,188,619
Net realized gain (loss)			3,195,391				7,924,929								(624,311	)			2,604,388
Net change in unrealized appreciation (depreciation)			(131,405,935	)			23,622,031								(4,248,811	)			239,045
Net increase (decrease) in net assets resulting from operations			(41,474,892	)			118,378,911								13,094,898				20,032,052
DISTRIBUTIONS TO SHAREHOLDERS(a)(b)
From net investment income			(85,614,025	)			(84,934,828	)							(16,888,787	)			(18,141,462	)
From return of capital			—				(5,757,690	)							—				—
Decrease in net assets resulting from distributions to shareholders			(85,614,025	)			(90,692,518	)							(16,888,787	)			(18,141,462	)
CAPITAL SHARE TRANSACTIONS
Redemption of shares resulting from share repurchase program (including transaction costs)			(30,991,477	)			(8,822,801	)							—				—
Reinvestment of common distributions			—				—								—				54,996
Net increase (decrease) in net assets derived from capital share transactions			(30,991,477	)			(8,822,801	)							—				54,996
NET ASSETS(b)
Total increase (decrease) in net assets			(158,080,394	)			18,863,592								(3,793,889	)			1,945,586
Beginning of year			1,598,033,949				1,579,170,357								342,889,680				340,944,094
End of year		$	1,439,953,555			$	1,598,033,949							$	339,095,791			$	342,889,680

 

(a)	Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(b)	Prior year distribution character information and undistributed net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. Refer to Note 12 for this prior year information.

See notes to financial statements.

 

 

86		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Consolidated Statements of Changes in Net Assets

 

		BIT
		Year Ended October 31,
		2018				2017
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income		$	52,379,994			$	57,681,034
Net realized gain			5,463,485				12,036,324
Net change in unrealized appreciation (depreciation)			(48,816,423	)			41,903,130
Net increase in net assets resulting from operations			9,027,056				111,620,488
DISTRIBUTIONS TO SHAREHOLDERS(a)(b)
From net investment income			(56,503,375	)			(67,788,341	)
From return of capital			(1,708,837	)			—
Decrease in net assets resulting from distributions to shareholders			(58,212,212	)			(67,788,341	)
CAPITAL SHARE TRANSACTIONS
Redemption of shares resulting from share repurchase program (including transaction costs)			(5,842,460	)			(4,354,046	)
NET ASSETS(b)
Total increase (decrease) in net assets			(55,027,616	)			39,478,101
Beginning of year			765,859,146				726,381,045
End of year		$	710,831,530			$	765,859,146

 

(a)	Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(b)	Prior year distribution character information and undistributed net investment income has been modified or removed to conform with current year Regulation S-X presentation changes. Refer to Note 12 for this prior year information.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS			87

---

Statements of Cash Flows

Year Ended October 31, 2018

 

		BTZ								BGT				BIT (a)
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
Net increase (decrease) in net assets resulting from operations		$					(41,474,892	)		$	13,094,898			$	9,027,056
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by (used for) operating activities:
Proceeds from sales of long-term investments and principal paydowns			642,430,891								297,095,706				518,393,099
Purchases of long-term investments			(862,355,005)								(291,599,640	)			(420,415,952	)
Net proceeds from sales (purchases) of short-term securities			1,235,917								1,612,145				(1,725,424	)
Amortization of premium and accretion of discount on investments and other fees			2,827,701								(448,773	)			(9,884,593	)
Paid-in-kind income			—								(472,028	)			—
Premiums received from options written			240,727								—				—
Premiums paid on closing options written			(55,783)								—				(15,340	)
Net realized loss on investments and options written			7,504,425								953,621				530,317
Net unrealized depreciation on investments, options written, swaps, unfunded floating rate loan interests and foreign currency translations			135,596,189								4,244,079				54,846,299
(Increase) Decrease in Assets:
Receivables:
Interest — unaffiliated			(2,522,659)								311,936				748,829
Dividends — affiliated			(15,953)								(1,076	)			(3,404	)
Dividends — unaffiliated			—								—				(5,597	)
Variation margin on futures contracts			(1,143,216)								—				(5,491	)
Variation margin on centrally cleared swaps			—								—				(736,324	)
Swap premiums paid			59,050								211,869				22,870
Prepaid expenses			(77,548)								593				(95	)
Increase (Decrease) in Liabilities:
Cash received:
Collateral — OTC derivatives			(330,000)								—				510,000
Collateral — reverse repurchase agreements			(120,000)								—				(2,153,000	)
Payables:
Investment advisory fees			66,268								(5,712	)			(78,190	)
Interest expense and fees			—								111,082				—
Trustees’ and Officer’s			(41,623)								(14,057	)			12,706
Variation margin on futures contracts			147,594								—				52,862
Variation margin on centrally cleared swaps			(15,485)								—				—
Swaps			—								—				6,277
Other accrued expenses			149,234								127,878				174,793
Due to counterparty			—								212,836				306,330
Swap premiums received			(105,987)								—				(2,629,440	)
Net cash provided by (used for) operating activities			(118,000,155)								25,435,357				146,978,588
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Payments on redemption of Common Shares			(30,470,956)								—				(5,842,460	)
Net borrowing of reverse repurchase agreements			237,260,380								—				(88,475,250	)
Proceeds from bank borrowings			—								192,000,000				—
Payments for bank borrowings			—								(200,000,000	)			—
Cash dividends paid to Common Shareholders			(85,631,463)								(16,889,850	)			(58,214,591	)
Increase (decrease) in bank overdraft			(40,773)								—				133,670
Net cash (provided by) used for financing activities			121,117,188								(24,889,850	)			(152,398,631	)

 

(a)	Consolidated Statement of Cash Flows.

See notes to financial statements.

 

 

88		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Statements of Cash Flows  (continued)

Year Ended October 31, 2018

 

		BTZ				BGT				BIT (a)
CASH IMPACT FROM FOREIGN EXCHANGE FLUCTUATIONS
Cash impact from foreign exchange fluctuations		$	(3,153	)		$	(485	)		$	(331,931	)
CASH
Net increase (decrease) in restricted and unrestricted cash and foreign currency			3,113,880				545,022				(5,751,974	)
Restricted and unrestricted cash and foreign currency at beginning of year			2,765,193				1,431,390				25,259,739
Restricted and unrestricted cash and foreign currency at end of year		$	5,879,073			$	1,976,412			$	19,507,765
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest expense		$	13,493,211			$	3,571,931			$	10,745,930
RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE END OF YEAR TO THE STATEMENTS OF ASSETS AND LIABILITIES
Cash		$	69,768			$	793,986			$	—
Cash pledged:
Collateral — reverse repurchase agreements			—				—				2,953,000
Collateral — OTC derivatives			—				—				3,320,000
Futures contracts			3,774,000				—				156,329
Centrally cleared swaps			2,011,000				—				6,565,590
Foreign currency at value			24,305				1,182,426				6,512,846
		$	5,879,073			$	1,976,412			$	19,507,765
RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AT THE BEGINNING OF YEAR TO THE STATEMENTS OF ASSETS AND LIABILITIES
Cash		$	—			$	1,412,165			$	—
Cash pledged:
Collateral — reverse repurchase agreements			1,173,000				—				—
Collateral — OTC derivatives			—				—				8,960,000
Futures contracts			1,124,000				—				109,532
Centrally cleared swaps			437,000				—				2,798,590
Foreign currency at value			31,193				19,225				13,391,617
		$	2,765,193			$	1,431,390			$	25,259,739

 

(a)	Consolidated Statement of Cash Flows.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS			89

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Financial Highlights

(For a share outstanding throughout each period)

 

		BTZ
		Year Ended October 31,
		2018				2017				2016				2015				2014
Net asset value, beginning of year		$	14.88			$	14.61			$	14.33			$	15.36			$	14.99
Net investment income(a)			0.81				0.81				0.88				0.96				0.99
Net realized and unrealized gain (loss)			(1.17	)			0.30				0.32				(1.02	)			0.35
Net increase (decrease) from investment operations			(0.36	)			1.11				1.20				(0.06	)			1.34
Distributions(b)
From net investment income			(0.80	)			(0.79	)			(0.86	)			(0.91	)			(0.97	)
From return of capital			—				(0.05	)			(0.06	)			(0.06	)			—
Total distributions			(0.80	)			(0.84	)			(0.92	)			(0.97	)			(0.97	)
Net asset value, end of year		$	13.72			$	14.88			$	14.61			$	14.33			$	15.36
Market price, end of year		$	11.72			$	13.36			$	12.87			$	12.53			$	13.54
Total Return(c)
Based on net asset value			(1.72	)%			8.53	%			9.61	%			0.48	%			10.11	%
Based on market price			(6.49	)%			10.62	%			10.43	%			(0.33	)%			12.18	%
Ratios to Average Net Assets
Total expenses			1.82	%			1.23	%			1.20	%			1.16	%			1.11	%
Total expenses after fees waived and/or paid indirectly			1.82	%			1.23	%			1.20	%			1.15	%			1.11	%
Total expenses after fees waived and/or paid indirectly and excluding interest expense			0.94	%			0.87	%			0.95	%			0.97	%			0.96	%
Net investment income			5.69	%			5.53	%			6.21	%			6.40	%			6.48	%
Supplemental Data
Net assets, end of year (000)		$	1,439,954			$	1,598,034			$	1,579,170			$	1,549,123			$	1,660,442
Borrowings outstanding, end of year (000)		$	707,102			$	477,822			$	638,327			$	685,716			$	759,752
Portfolio turnover rate			30	%			25	%			29	%			19	%			29	%

 

(a)	Based on average shares outstanding.

(b)	Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(c)	Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

See notes to financial statements.

 

 

90		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

		BGT
		Year Ended October 31,
		2018				2017				2016				2015 (a)				2014 (a)
Net asset value, beginning of year		$	14.49			$	14.41			$	14.18			$	14.57			$	14.79
Net investment income(b)			0.76				0.73				0.74				0.78				0.84
Net realized and unrealized gain (loss)			(0.21	)			0.12				0.19				(0.36	)			(0.22	)
Net increase from investment operations			0.55				0.85				0.93				0.42				0.62
Distributions from net investment income(c)			(0.71	)			(0.77	)			(0.70	)			(0.81	)			(0.84	)
Net asset value, end of year		$	14.33			$	14.49			$	14.41			$	14.18			$	14.57
Market price, end of year		$	12.72			$	14.31			$	13.58			$	12.77			$	13.18
Total Return(d)
Based on net asset value			4.25	%			6.13	%			7.27	%			3.54	%			4.60	%
Based on market price			(6.30	)%			11.21	%			12.25	%			3.08	%			(0.89	)%
Ratios to Average Net Assets
Total expenses			2.29	%(e)			1.92	%			1.58	%			1.55	%			1.52	%
Total expenses after fees waived and paid indirectly			2.29	%(e)			1.92	%			1.58	%			1.54	%			1.52	%
Total expenses after fees waived and paid indirectly and excluding interest expense			1.21	%(e)			1.20	%			1.16	%			1.19	%			1.18	%
Net investment income			5.27	%(e)			5.02	%			5.29	%			5.37	%			5.71	%
Supplemental Data
Net assets, end of year (000)		$	339,096			$	342,890			$	340,944			$	335,444			$	344,668
Borrowings outstanding, end of year (000)		$	142,000			$	150,000			$	148,000			$	104,000			$	145,000
Asset coverage, end of year per $1,000 of bank borrowings		$	3,389			$	3,287			$	3,304			$	4,225			$	3,377
Portfolio turnover rate			57	%			63	%			47	%			42	%			64	%

 

(a)	Consolidated Financial Highlights.

(b)	Based on average shares outstanding.

(c)	Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d)	Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

(e)	Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%.

See notes to financial statements.

 

 

FINANCIAL HIGHLIGHTS			91

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Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

		BIT
		Year Ended October 31,
		2018 (a)				2017 (a)				2016 (a)				2015				2014
Net asset value, beginning of year		$	20.07			$	18.91			$	18.91			$	19.87			$	18.95
Net investment income(b)			1.38				1.51				1.69				1.55				1.62
Net realized and unrealized gain (loss)			(1.13	)			1.42				(0.05	)			(1.03	)			0.70
Net increase from investment operations			0.25				2.93				1.64				0.52				2.32
Distributions(c)
From net investment income			(1.49	)			(1.77	)			(1.64	)			(1.40	)			(1.40	)
From net realized gain			—				—				—				(0.08	)			—
From return of capital			(0.04	)			—				—				—				—
Total distributions			(1.53	)			(1.77	)			(1.64	)			(1.48	)			(1.40	)
Net asset value, end of year		$	18.79			$	20.07			$	18.91			$	18.91	(d)		$	19.87
Market price, end of year		$	16.25			$	18.55			$	16.76			$	16.31			$	17.79
Total Return(e)
Based on net asset value			2.18	%(f)			17.34	%(g)			10.51	%(f)			3.87	%(d)			13.40	%
Based on market price			(4.40	)%			22.36	%			13.56	%			0.06	%			12.91	%
Ratios to Average Net Assets
Total expenses			2.90	%			2.33	%			2.05	%(h)			2.09	%(h)			2.04	%
Total expenses after fees waived and paid indirectly			2.89	%			2.33	%			2.05	%(h)			2.09	%(h)			2.04	%
Total expenses after fees waived and paid indirectly and excluding interest expense and fees			1.42	%			1.39	%			1.43	%(h)			1.53	%(h)			1.52	%
Net investment income			7.17	%			7.86	%			9.24	%(h)			7.97	%(h)			8.27	%
Supplemental Data
Net assets, end of year (000)		$	710,832			$	765,859			$	726,381			$	726,432			$	763,360
Borrowings outstanding, end of year (000)		$	376,302			$	471,082			$	427,329			$	510,352			$	707,294
Portfolio turnover rate			38	%			53	%			52	%			21	%			29	%

 

(a)	Consolidated Financial Highlights.

(b)	Based on average shares outstanding.

(c)	Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d)

For financial reporting purposes, the market value of certain investments was adjusted as of report date. Accordingly, the net asset value (“NAV”) per share and total return performance based on net asset value presented herein are different than the information previously published on October 31, 2015.

(e)	Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices.

(f)	Includes payment received from an affiliate, which had no impact on the Trust’s total return.

(g)	Includes payment received from a settlement of litigation, which impacted the Trust’s total return. Excluding the payment from a settlement of litigation, the Trust’s total return is 16.70%.

(h)	Excludes expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01% for the years ended October 31, 2016 and October 31, 2015.

See notes to financial statements.

 

 

92		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Notes to Financial Statements

 

1.	ORGANIZATION

The following are registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as closed-end management investment companies and are referred to herein collectively as the “Trusts”, or individually as a “Trust”:

 

Trust Name		Herein Referred To As		Organized		Diversification Classification
BlackRock Credit Allocation Income Trust		BTZ		Delaware			Diversified
BlackRock Floating Rate Income Trust		BGT		Delaware			Diversified
BlackRock Multi-Sector Income Trust		BIT		Delaware			Diversified	*

 

*

The Trust’s classification changed from non-diversified to diversified during the reporting period.

The Boards of Trustees of the Trusts are collectively referred to throughout this report as the “Board of Trustees” or the “Board,” and the trustees thereof are collectively referred to throughout this report as “Trustees”. The Trusts determine and make available for publication the net asset values (“NAVs”) of their Common Shares on a daily basis.

The Trusts, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of closed-end funds referred to as the Closed-End Complex.

Basis of Consolidation: The accompanying consolidated financial statements of BIT include the accounts of BIT Subsidiary, LLC (the “Taxable Subsidiary”), which is a wholly-owned taxable subsidiary of BIT. The Taxable Subsidiary enables BIT to hold an investment in an operating partnership and satisfy Regulated Investment Company (“RIC”) tax requirements. Income earned and gains realized on the investment held by the Taxable Subsidiary are taxable to such subsidiary. A tax provision for income, if any, is shown as income tax in the Consolidated Statements of Operations for BIT. A tax provision for realized and unrealized gains, if any, is included as a reduction of realized and/or unrealized gain (loss) in the Consolidated Statement of Operations for BIT. BIT may invest up to 25% of its total assets in the Taxable Subsidiary. The net assets of the Taxable Subsidiary as of period end were $0, which is 0.0% of BIT’s consolidated net assets. Intercompany accounts and transactions, if any, have been eliminated. The Taxable Subsidiary is subject to the same investment policies and restrictions that apply to BIT.

 

2.	SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Trust is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Trusts are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, a portion of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis.

Foreign Currency Translation: Each Trust’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

Each Trust does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Trust reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where a Trust enters into certain investments (e.g., futures contracts, forward foreign currency exchange contracts, options written and swaps) or certain borrowings (e.g., reverse repurchase transactions,) that would be treated as “senior securities” for 1940 Act purposes, a Trust may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investment or borrowing to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Trusts may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. Portions of return of capital distributions under U.S. GAAP may be taxed at ordinary income rates. The character of distributions is determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds a Trust’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from

 

 

NOTES TO FINANCIAL STATEMENTS			93

---

Notes to Financial Statements  (continued)

 

prior years. However, certain Trusts have capital loss carryforwards from pre-2012 tax years that offset realized net capital gains but do not offset current earnings and profits. Consequently, if distributions in any tax year are less than the Trust’s current earnings and profits but greater than net investment income and net realized capital gains (taxable income), distributions in excess of taxable income are not treated as non-taxable return of capital, but rather may be taxable to shareholders at ordinary income rates. Under certain circumstances, taxable excess distributions could be significant. See Note 8, Income Tax Information, for the tax character of each Trust’s distributions paid during the year.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by each Trust’s Board, the independent Trustees (“Independent Trustees”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Trustees. This has the same economic effect for the Independent Trustees as if the Independent Trustees had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Trust, if applicable. Deferred compensation liabilities are included in the Trustees’ and Officer’s fees payable in the Statements of Assets and Liabilities and will remain as a liability of the Trusts until such amounts are distributed in accordance with the Plan.

Recent Accounting Standards: In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization of Purchased Callable Debt Securities” which amends the amortization period for certain purchased callable debt securities. Under the new guidance, the premium amortization of purchased callable debt securities that have explicit, non-contingent call features and are callable at fixed prices will be amortized to the earliest call date. The guidance will be applied on a modified retrospective basis and is effective for fiscal years, and their interim periods, beginning after December 15, 2018. Management is currently evaluating the impact of this guidance to the Trusts.

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update 2018-13 “Changes to the Disclosure Requirements for Fair Value Measurement” which modifies disclosure requirements for fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. Management is currently evaluating the impact of this guidance to the Trusts.

Indemnifications: In the normal course of business, a Trust enters into contracts that contain a variety of representations that provide general indemnification. A Trust’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Trust, which cannot be predicted with any certainty.

Other: Expenses directly related to a Trust are charged to that Trust. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.

 

3.	INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Trusts’ investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Trusts would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Trusts determine the fair values of their financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of each Trust (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Trust’s assets and liabilities:

 

•

Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price.

 

•

Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Trusts’ net assets. Each business day, the Trusts use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.

 

 

94		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Notes to Financial Statements  (continued)

 

 

•

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

 

•

Investments in open-end U.S. mutual funds are valued at NAV each business day.

 

•

Futures contracts traded on exchanges are valued at their last sale price.

 

•

Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

 

•

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. OTC options and options on swaps (“swaptions”) are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

 

•

Swap agreements are valued utilizing quotes received daily by the Trusts’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Trust might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement.

The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of each Trust’s pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis. As a result of the inherent uncertainty in valuation of these investments, the fair values may differ from the values that would have been used had an active market existed.

For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by third party pricing services utilize one or a combination of, but not limited to, the following inputs.

 

		Standard Inputs Generally Considered By Third Party Pricing Services
Market approach		(i)  recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii)   recapitalizations and other transactions across the capital structure; and (iii)  market multiples of comparable issuers.
Income approach		(i)  future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; (ii)   quoted prices for similar investments or assets in active markets; and (iii)  other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates.
Cost approach		(i)  audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii)   changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii)  relevant news and other public sources; and (iv)  known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company.

Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.

The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by a Trust. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date a Trust is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Trust could receive upon the sale of the investment.

 

 

NOTES TO FINANCIAL STATEMENTS			95

---

Notes to Financial Statements  (continued)

 

Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:

 

•

Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Trust has the ability to access

 

•

Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

 

•

Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including each Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with each Trust’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

 

4.	SECURITIES AND OTHER INVESTMENTS

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a trust may subsequently have to reinvest the proceeds at lower interest rates. If a trust has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statements of Operations, even though investors do not receive their principal until maturity.

 

 

96		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

---

Notes to Financial Statements  (continued)

 

Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. Government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”). The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated prepayments of principal, a trust’s initial investment in the IOs may not fully recoup.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Warrants: Warrants entitle a fund to purchase a specified number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any. If the price of the underlying stock does not rise above the strike price before the warrant expires, the warrant generally expires without any value and a trust will lose any amount it paid for the warrant. Thus, investments in warrants may involve more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock.

Floating Rate Loan Interests: Floating rate loan interests are typically issued to companies (the “borrower”) by banks, other financial institutions, or privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged or in bankruptcy proceedings. In addition, transactions in floating rate loan interests may settle on a delayed basis, which may result in proceeds from the sale not being readily available for a trust to make additional investments or meet its redemption obligations. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. Since the rates reset only periodically, changes in prevailing interest rates (and particularly sudden and significant changes) can be expected to cause some fluctuations in the NAV of a trust to the extent that it invests in floating rate loan interests. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. These investments are treated as investments in debt securities for purposes of a trust’s investment policies.

When a trust purchases a floating rate loan interest, it may receive a facility fee and when it sells a floating rate loan interest, it may pay a facility fee. On an ongoing basis, a trust may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by a trust upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. A trust may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. A trust may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in a trust having a contractual relationship only with the lender, not with the borrower. A trust has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, a trust generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower. A trust may not benefit directly from any collateral supporting the loan

 

 

NOTES TO FINANCIAL STATEMENTS			97

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Notes to Financial Statements  (continued)

 

in which it has purchased the Participation. As a result, a trust assumes the credit risk of both the borrower and the lender that is selling the Participation. A trust’s investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, a trust may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in a trust having a direct contractual relationship with the borrower, and a trust may enforce compliance by the borrower with the terms of the loan agreement.

In connection with floating rate loan interests, certain trusts may also enter into unfunded floating rate loan interests (“commitments”). In connection with these commitments, a trust earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Statements of Operations, is recognized ratably over the commitment period. Unfunded floating rate loan interests are marked-to-market daily, and any unrealized appreciation (depreciation) is included in the Statements of Assets and Liabilities and Statements of Operations. As of period end, the trusts had the following unfunded floating rate loan interests:

 

		Borrower		Par				Commitment Amount				Value				Unrealized Appreciation (Depreciation)
BGT		Access CIG LLC		$	7,562			$	7,562			$	7,562			$	—
		Access CIG LLC			40,439				40,439				40,510				71
		CFSP Acquisition Corp.			74,747				74,560				73,812				(748	)
		DentalCorp Perfect Smile ULC			88,180				88,326				88,511				185
		Mavis Tire Express Services Corp.			107,362				32,249				31,927				(322	)
BIT		Access CIG LLC			1,444				1,444				1,444				—
		Access CIG LLC			9,279				9,279				9,295				16
		DentalCorp Perfect Smile ULC			18,813				18,813				18,884				71
		Mavis Tire Express Services Corp.			13,083				13,083				12,952				(131	)

Forward Commitments and When-Issued Delayed Delivery Securities: Certain trusts may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A trust may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a trust may be required to pay more at settlement than the security is worth. In addition, a trust is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a trust assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a trust’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third party broker dealers in which a trust sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A trust receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a trust continues to receive the principal and interest payments on the securities sold. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. A trust may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a trust suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a trust would still be required to pay the full repurchase price. Further, a trust remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a trust would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a trust to the counterparties are recorded as a component of interest expense in the Statements of Operations. In periods of increased demand for the security, a trust may receive a fee for the use of the security by the counterparty, which may result in interest income to a trust.

For the year ended October 31, 2018, the average amount of reverse repurchase agreements outstanding and the daily weighted average interest rate for the Trusts were as follows:

 

		Average Amount Outstanding				Daily Weighted Average Interest Rate
BTZ		$	643,986,829				2.10	%
BIT			467,879,150				2.30

Reverse repurchase transactions are entered into by a trust under Master Repurchase Agreements (each, an “MRA”), which permit a trust, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from a trust. With reverse repurchase transactions, typically a trust and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a trust receives or posts securities and cash as collateral with a market value in excess of the repurchase price to be paid or received by a trust upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a trust is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

 

 

98		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Notes to Financial Statements  (continued)

 

As of period end, the following table is a summary of a Trust’s open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:

 

BTZ
Counterparty		Reverse Repurchase Agreements				Fair Value of Non-cash Collateral Pledged Including Accrued Interest (a)				Cash Collateral Pledged/Received				Net Amount
Barclays Bank PLC		$	3,408,016			$	(3,408,016	)		$	—			$	—
Barclays Capital, Inc.			121,277,888				(121,277,888	)			—				—
BNP Paribas S.A.			162,975,772				(162,975,772	)			—				—
Citigroup Global Markets, Inc.			283,217				(283,217	)			—				—
Credit Suisse Securities (USA) LLC			33,142,526				(33,142,526	)			—				—
Deutsche Bank Securities, Inc.			3,841,781				(3,841,781	)			—				—
RBC Capital Markets LLC			374,189,677				(374,189,677	)			—				—
UBS Securities LLC			7,983,556				(7,983,556	)			—				—
		$	707,102,433			$	(707,102,433	)		$	—			$	—

 

(a)

Net collateral, including accrued interest, with a value of $762,050,015 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

 

BIT
Counterparty		Reverse Repurchase Agreements				Fair Value of Non-cash Collateral Pledged Including Accrued Interest (a)				Cash Collateral Pledged/Received				Net Amount (b)
Barclays Bank PLC		$	29,666,137			$	(29,666,137	)		$	—			$	—
Barclays Capital, Inc.			10,620,386				(10,620,386	)			—				—
BNP Paribas S.A.			60,045,659				(60,045,659	)			—				—
Citigroup Global Markets, Inc.			22,657				(22,657	)			—				—
Credit Suisse Securities (USA) LLC			6,353,747				(6,353,747	)			—				—
Deutsche Bank Securities, Inc.			24,053,492				(24,053,492	)			—				—
HSBC Securities (USA), Inc.			50,877,753				(50,877,753	)			—				—
RBC Capital Markets, LLC			142,033,246				(142,033,246	)			—				—
Royal Bank of Canada			4,826,519				(4,372,428	)			—				454,091
UBS Ltd.			9,975,051				(9,975,051	)			—				—
UBS Securities LLC			37,827,275				(37,827,275	)			—				—
		$	376,301,922			$	(375,847,831	)		$	—			$	454,091

 

(a)

Net collateral, including accrued interest, with a value of $415,158,614 has been pledged/received in connection with open reverse repurchase agreements. Excess of net collateral pledged to the individual counterparty is not shown for financial reporting purposes.

(b)

Net amount represents the net amount payable due to the counterparty in the event of default.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a trust’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a trust’s obligation to repurchase the securities.

 

5.	DERIVATIVE FINANCIAL INSTRUMENTS

The Trusts engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Trusts and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk), and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are agreements between the Trusts and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statements of Assets and Liabilities.

Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, is shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of

 

 

NOTES TO FINANCIAL STATEMENTS			99

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Notes to Financial Statements  (continued)

 

Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.

Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).

A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Trusts are denominated and in some cases, may be used to obtain exposure to a particular market.

The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statements of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives in the Statements of Assets and Liabilities.

Options: Certain Trusts purchase and write call and put options to increase or decrease their exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value — unaffiliated and options written at value, respectively, in the Statements of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statements of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statements of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Trusts write a call option, such option is typically “covered,” meaning that they hold the underlying instrument subject to being called by the option counterparty. When the Trusts write a put option, such option is covered by cash in an amount sufficient to cover the obligation. These amounts, which are considered restricted, are included in cash pledged as collateral for options written in the Statements of Assets and Liabilities.

 

•

Swaptions — Certain Trusts purchase and write options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Trusts’ holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

 

•

Foreign currency options — Certain Trusts purchase and write foreign currency options, foreign currency futures and options on foreign currency futures to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk). Foreign currency options give the purchaser the right to buy from or sell to the writer a foreign currency at any time before the expiration of the option.

 

•

Barrier options — Certain Trusts may purchase and write a variety of options with non-standard payout structures or other features (“barrier options”) that are generally traded OTC.

The Trusts may invest in various types of barrier options, including down-and-out options, down-and-in options, double no-touch options, one-touch options, up-and-out options and up-and-in options. Down-and-out options expire worthless to the purchaser if the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Down-and-in options expire worthless to the purchaser unless the price of the underlying instrument falls below a specific barrier price level prior to the expiration date. Double no-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument does not reach or surpass predetermined barrier price levels prior to the option’s expiration date. One-touch options provide the purchaser an agreed-upon payout if the price of the underlying instrument reaches or surpasses predetermined barrier price levels prior to the expiration date. Up-and-out options expire worthless to the purchaser if the price of the underlying instrument increases beyond a predetermined barrier price level prior to the expiration date. Up-and-in options can only be exercised when the price of the underlying instrument increases beyond a predetermined barrier price level.

In purchasing and writing options, the Trusts bear the risk of an unfavorable change in the value of the underlying instrument or the risk that they may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Trusts purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Trusts and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation)

 

 

100		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Notes to Financial Statements  (continued)

 

on OTC Swaps in the Statements of Assets and Liabilities. Payments received or paid are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Trusts’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Trusts’ counterparty on the swap agreement becomes the CCP. The Trusts are required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Trusts are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps in the Statements of Assets and Liabilities. Pursuant to the contract, the Trusts agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statements of Operations.

 

•

Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a trust is not otherwise exposed (credit risk).

The Trusts may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Trusts will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Trusts will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

 

•

Total return swaps — Total return swaps are entered into to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one market (e.g., fixed-income) with another market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk).

Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument, or basket or underlying instruments, in exchange for fixed or floating rate interest payments. If the total return of the instruments or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Trusts receive payment from or make a payment to the counterparty.

 

•

Interest rate swaps — Interest rate swaps are entered into to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

 

•

Forward swaps — Certain Trusts enter into forward interest rate swaps and forward total return swaps. In a forward swap, each Trust and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination.

 

•

Inflation swaps — Inflation swaps are entered into to gain or reduce exposure to inflation (inflation risk). In an inflation swap, one party makes fixed interest payments on a notional principal amount in exchange for another party’s variable payments based on an inflation index, such as the Consumer Price Index.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Master Netting Arrangements: In order to define their contractual rights and to secure rights that will help them mitigate their counterparty risk, the Trusts may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their counterparties. An ISDA Master Agreement is a bilateral agreement between each Trust and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Trust may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Trusts and the counterparty.

 

 

NOTES TO FINANCIAL STATEMENTS			101

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Notes to Financial Statements  (continued)

 

Cash collateral that has been pledged to cover obligations of the Trusts and cash collateral received from the counterparty, if any, is reported separately in the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Trusts, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Trusts. Any additional required collateral is delivered to/pledged by the Trusts on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. A Trust generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Trusts from their counterparties are not fully collateralized, they bear the risk of loss from counterparty non-performance. Likewise, to the extent the Trusts have delivered collateral to a counterparty and stand ready to perform under the terms of their agreement with such counterparty, they bear the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Trusts do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

 

6.	INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

The PNC Financial Services Group, Inc. is the largest stockholder and an affiliate of BlackRock, Inc. (“BlackRock”) for 1940 Act purposes.

Investment Advisory: Each Trust entered into an Investment Advisory Agreement with the Manager, the Trusts’ investment adviser and an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of each Trust’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Trust.

For such services, BTZ and BGT each pay the Manager a monthly fee at an annual rate equal to 0.62% and 0.75%, respectively, of the average weekly value of each Trust’s managed assets. For purposes of calculating these fees, “managed assets” mean the total assets of the Trust minus the sum of its accrued liabilities (other than the aggregate indebtedness constituting financial leverage).

For such services, BIT pays the Manager a monthly fee at an annual rate equal to 0.80% of the average daily value of Trust’s managed assets. For purposes of calculating the investment advisory fee, “managed assets” means the total assets of the Trust (including any assets attributable to money borrowed for investment purposes) minus the sum of its accrued liabilities (other than money borrowed for investment purposes).

The Manager provides investment management and other services to the Taxable Subsidiary. The Manager does not receive separate compensation from the Taxable Subsidiary for providing investment management or administrative services. However, BIT pays the Manager based on BIT’s net assets, plus the proceeds of any debt securities or outstanding borrowings used for leverage, which includes the assets of the Taxable Subsidiary.

With respect to BIT, the Manager entered into a sub-advisory agreement with BlackRock (Singapore) Limited (“BRS”), an affiliate of the Manager. The Manager pays BRS, for services it provides for that portion of BIT for which BRS acts as sub-adviser, a monthly fee that is a percentage of the investment advisory fees paid by BIT to the Manager.

Expense Waivers: With respect to each Trust, the Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Trust pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”). These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the year ended October 31, 2018, the amounts waived were as follows:

 

		BTZ				BGT				BIT
Amounts waived		$	6,500			$	1,313			$	5,065

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of each Trust’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2019. The agreement can be renewed for annual periods thereafter, and may be terminated on 90 days’ notice, each subject to approval by a majority of the Trusts’ Independent Trustees. For the year ended October 31, 2018, BGT waived $8,434 in investment advisory fees pursuant to these arrangements.

Trustees and Officers: Certain trustees and/or officers of the Trusts are trustees and/or officers of BlackRock or its affiliates. The Trusts reimburse the Manager for a portion of the compensation paid to the Trusts’ Chief Compliance Officer, which is included in Trustees and Officer in the Statements of Operations.

Other Transactions: During the year ended October 31, 2018, BIT received a reimbursement of $1,943 from an affiliate, which is included in payment by affiliate in the Consolidated Statement of Operations, related to an operating event.

The Trusts may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the year ended October 31, 2018, the purchase and sale transactions and any net realized gains (losses) with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:

 

		Purchases				Sales				Net Realized Gain
BIT		$	607,936			$	917,283			$	25,772

 

 

102		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Notes to Financial Statements  (continued)

 

 

7.	PURCHASES AND SALES

For the year ended October 31, 2018, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:

 

Purchases		BTZ				BGT				BIT
Non-U.S. Government Securities		$	698,919,282			$	287,041,834			$	423,718,640
U.S. Government Securities			144,256,128				—				19,087,247
Total Purchases		$	843,175,410			$	287,041,834			$	442,805,887
Sales
Non-U.S. Government Securities		$	482,948,639			$	302,255,780			$	524,713,820
U.S. Government Securities			166,233,982				—				—
Total Sales		$	649,182,621			$	302,255,780			$	524,713,820

 

8.	INCOME TAX INFORMATION

It is each Trust’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

Each Trust files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Trust’s U.S. federal tax returns generally remains open for each of the four years ended October 31, 2018. The statutes of limitations on each Trust’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Trusts as of October 31, 2018, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Trusts’ financial statements.

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of period end, the following permanent differences attributable to the expiration of capital loss carryforwards were reclassified to the following accounts:

 

		BTZ				BGT				BIT
Paid-in capital		$	(31,756,723	)		$	(16,526,601	)		$	—
Accumulated loss			31,756,723				16,526,601				—

The tax character of distributions paid was as follows:

 

						BTZ				BGT				BIT
Ordinary income			10/31/18			$	85,614,025			$	16,888,787			$	56,503,375
			10/31/17				84,934,828				18,141,462				67,788,341
Return of capital			10/31/18				—				—				1,708,837
			10/31/17				5,757,690				—				—
Total			10/31/18			$	85,614,025			$	16,888,787			$	58,212,212
			10/31/17			$	90,692,518			$	18,141,462			$	67,788,341

As of period end, the tax components of accumulated net earnings (losses) were as follows:

 

		BTZ				BGT				BIT
Undistributed ordinary income		$	983,173			$	2,313,349			$	—
Capital loss carryforwards			(37,063,666	)			(10,335,289	)			(23,849,561	)
Net unrealized gains (losses)(a)			11,177,883				(4,265,274	)			18,804,979
		$	(24,902,610	)		$	(12,287,214	)		$	(5,044,582	)

 

(a)

The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the tax deferral of losses on wash sales and straddles, the realization for tax purposes of unrealized gains/losses on certain futures, options and foreign currency exchange contracts, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies amortization methods for premiums and discounts on fixed income securities, the accrual of income on securities in default, the timing and recognition of partnership income, the accounting for swap agreements, the deferral of compensation to Directors and the classification of investments.

 

 

NOTES TO FINANCIAL STATEMENTS			103

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Notes to Financial Statements  (continued)

 

As of October 31, 2018, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

 

Expires October 31,		BTZ				BGT				BIT
No expiration date(a)		$	26,710,391			$	9,925,865			$	23,849,561
2019			10,353,275				409,424				—
		$	37,063,666			$	10,335,289			$	23,849,561

 

(a)

Must be utilized prior to losses subject to expiration.

During the year ended October 31, 2018, the Trusts listed below utilized the following amounts of their respective capital loss carryforward:

 

		BTZ				BIT
Amount utilized		$	8,576,677			$	4,772,145

As of October 31, 2018, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

		BTZ				BGT				BIT
Tax cost		$	2,103,852,041			$	494,822,818			$	1,075,839,010
Gross unrealized appreciation		$	67,407,998			$	1,584,042			$	41,105,655
Gross unrealized depreciation			(55,333,748	)			(5,619,429	)			(21,551,532	)
Net unrealized appreciation (depreciation)		$	12,074,250			$	(4,035,387	)		$	19,554,123

 

9.	BANK BORROWINGS

BGT is party to a senior committed secured, 360-day rolling line of credit facility and a separate security agreement (the “SSB Agreement”) with State Street Bank and Trust Company (“SSB”). SSB may elect to terminate its commitment upon 360-days written notice to BGT. As of period end, BGT has not received any notice to terminate. BGT has granted a security interest in substantially all of its assets to SSB.

The SSB Agreement allows for the maximum commitment amount of $168,000,000 for BGT.

Advances will be made by SSB to BGT, at BGT’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR. Overnight LIBOR and LIBOR rates are subject to a 0% floor.

In addition, BGT paid a commitment fee (based on the daily unused portion of the commitments). The fees associated with each of the agreements are included in the Statements of Operations as borrowing costs, if any. Advances to BGT as of period end are shown in the Statements of Assets and Liabilities as bank borrowings payable. Based on the short-term nature of the borrowings under the line of credit and the variable interest rate, the carrying amount of the borrowings approximates fair value.

BGT may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding short-term borrowings is less than 300%.

For the year ended October 31, 2018, the average amount of bank borrowings and the daily weighted average interest rates for BGT for loans under the revolving credit agreements were $144,490,411 and 2.55%, respectively.

 

10.	PRINCIPAL RISKS

In the normal course of business, certain Trusts invest in securities or other instruments and may enter into certain transactions, and such activities subject each Trust to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations.

Each Trust may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Trust to reinvest in lower yielding securities. Each Trust may also be exposed to reinvestment risk, which is the risk that income from each Trust’s portfolio will decline if each Trust invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Trust portfolio’s current earnings rate.

Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A Trust may invest in illiquid investments and may experience difficulty in selling those investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Trust’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Trust may lose value, regardless of the individual results of the securities and other instruments in which a Trust invests.

 

 

104		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Notes to Financial Statements  (continued)

 

The price a Trust could receive upon the sale of any particular portfolio investment may differ from a Trust’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore a Trust’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by a Trust, and a Trust could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. A Trust’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.

Counterparty Credit Risk: The Trusts may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Trusts manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Trusts to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Trusts’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Trusts.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Trust’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by such Trust.

For OTC options purchased, each Trust bears the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral held by the Trusts should the counterparty fail to perform under the contracts. Options written by the Trusts do not typically give rise to counterparty credit risk, as options written generally obligate the Trusts, and not the counterparty, to perform. The Trusts may be exposed to counterparty credit risk with respect to options written to the extent each Trust deposits collateral with its counterparty to a written option.

With exchange-traded options purchased, futures and centrally cleared swaps, there is less counterparty credit risk to the Trusts since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Trust does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Trusts.

Concentration Risk: Certain Trusts may invest in securities that are rated below investment grade quality (sometimes called “junk bonds”), which are predominantly speculative, have greater credit risk and generally are less liquid and have more volatile prices than higher quality securities.

Certain Trusts invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Trusts may be subject to a greater risk of rising interest rates due to the current period of historically low rates. The Federal Reserve has begun to raise the Federal Funds rate, and each increase results in more pronounced interest rate risk in the current market environment.

Certain Trusts invest a significant portion of their assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Investment percentages in these securities are presented in the Schedules of Investments. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

 

11.	CAPITAL SHARE TRANSACTIONS

Each Trust is authorized to issue an unlimited numbers of shares, all of which were initially classified as Common Shares. The par value for each Trust’s shares is $0.001, respectively. The Board is authorized, however, to reclassify any unissued Common shares to Preferred shares without the approval of Common Shareholders.

Common Shares: For the years shown, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:

 

Year Ended October 31		BGT
2018			—
2017			3,790

The Trusts participate in an open market share repurchase program (the “Repurchase Program”). Under the program, each Trust may repurchase up to 5% of its outstanding common shares from December 1, 2017 through November 30, 2018, based on common shares outstanding as of the close of business on November 30, 2017, subject to certain conditions. On September 7, 2018, the Trusts announced a continuation of the Repurchase Program. Commencing on December 1, 2018, each Trust may repurchase up to 5% of its outstanding common shares through November 30, 2019, based on common shares outstanding as of the close of business on November 30, 2018, subject to certain conditions. There is no assurance that the Trusts will purchase shares in any particular amounts. The total amount of the repurchase offer is reflected in each Trusts’ Statements of Changes in Net Assets.

 

 

NOTES TO FINANCIAL STATEMENTS			105

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Notes to Financial Statements  (continued)

 

For the years shown, shares repurchased and cost, including transaction costs were as follows:

 

		BTZ												BIT
Year Ended October 31		Shares				Amount								Shares				Amount
2018			2,489,141			$	30,991,477								345,071			$	5,842,460
2017			676,066				8,822,801								254,873				4,354,046

 

12.	REGULATION S-X AMENDMENTS

On August 17, 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification. The Trusts have adopted the amendments pertinent to Regulation S-X in this shareholder report. The amendments impacted certain disclosure presentation on the Statements of Assets and Liabilities, Statements of Changes in Net Assets and Notes to the Financial Statements.

Prior year distribution information and undistributed net investment income in the Statements of Changes in Net Assets has been modified to conform to the current year presentation in accordance with the Regulation S-X changes.

Distributions for the year ended October 31, 2017 were classified as follows:

 

		Net Investment Income				Return of Capital
BTZ		$	84,934,828			$	5,757,690
BGT			18,141,462				—
BIT			67,788,341				—

Undistributed net investment income as of October 31, 2017 is as follows:

 

		Undistributed Net Investment Income
BTZ		$	1,644,068
BGT			661,158
BIT			4,002,210

 

13.	SUBSEQUENT EVENTS

Management’s evaluation of the impact of all subsequent events on the Trusts’ financial statements was completed through the date the financial statements were issued and the following items were noted:

 

		Common Dividend Per Share
		Paid (a)				Declared (b)				Declared (c)				Declared (d)
BTZ		$	0.0670			$	0.0670			$	0.0670			$	—
BGT			0.0618				0.0618				0.0618				0.0425
BIT			0.1167				0.1167				0.1167				—

 

(a)

Net investment income dividend paid on December 3, 2018 to Common Shareholders of record on November 15, 2018.

(b)

Net investment income dividend declared on December 3, 2018, payable to Common Shareholders of record on December 13, 2018.

(c)

Net investment income dividend declared on December 19, 2018, payable to shareholders of record on December 31, 2018.

(d)

Net investment income special dividend declared on December 19, 2018, payable to shareholders of record on December 31, 2018.

 

 

106		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Trustees of

BlackRock Credit Allocation Income Trust, BlackRock Floating Rate Income Trust and BlackRock Multi-Sector Income Trust:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statements of assets and liabilities of BlackRock Credit Allocation Income Trust and BlackRock Floating Rate Income Trust, including the schedules of investments, as of October 31, 2018, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. We have also audited the accompanying consolidated statement of assets and liabilities of BlackRock Multi-Sector Income Trust (collectively with BlackRock Credit Allocation Income Trust and BlackRock Floating Rate Income Trust, the “Funds”), including the consolidated schedule of investments, as of October 31, 2018, the related consolidated statement of operations and cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of October 31, 2018, and the results of their operations and their cash flows for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2018, by correspondence with the custodian, agent banks and brokers; when replies were not received from brokers or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Deloitte & Touche LLP

Boston, Massachusetts

December 21, 2018

We have served as the auditor of one or more BlackRock investment companies since 1992.

 

 

Important Tax Information  (unaudited)

During the fiscal year ended October 31, 2018, the following information is provided with respect to the ordinary income distributions paid by the Trusts:

 

		Payable Date(s)		BTZ				BGT				BIT
Qualified Dividend Income for Individuals(a)		November 2017			13.14	%			—	%			10.40	%
		December 2017			13.14				—				12.50
		January 2018			13.14				—				15.00
		February 2018 — October 2018			18.64				—				13.51
Dividends Qualifying for the Dividend Received Deduction for Corporations(a)		November 2017 — October 2018			12.41				—				11.15
Interest-Related Dividends and Qualified Short-Term Gains for Non-U.S. Residents(b)		November 2017 — January 2018			79.78				79.66				58.16
		February 2018 — October 2018			56.23				75.91				40.26

 

(a)

The Trusts hereby designate the percentage indicated or the maximum amount allowable by law.

(b)

Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			107

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement

 

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”), of BlackRock Credit Allocation Income Trust (“BTZ”), BlackRock Floating Rate Income Trust (“BGT”) and BlackRock Multi-Sector Income Trust (“BIT,” and together with BGT and BTZ each, a “Trust,” and collectively, the “Trusts”) met in person on April 24, 2018 (the “April Meeting”) and June 6-7, 2018 (the “June Meeting”) to consider the approval of each Trust’s investment advisory agreement (each, an “Advisory Agreement,” and collectively, the “Advisory Agreements”) with BlackRock Advisors, LLC (the “Manager”), each Trust’s investment advisor. The Board of BIT also considered the approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) among the Manager, BlackRock (Singapore) Limited (the “Sub-Advisor”) and the Trust. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreements and the Sub-Advisory Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

On the date of the June Meeting, the Board of each Trust consisted of ten individuals, eight of whom were not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of its Trust and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chair of each Board is an Independent Board Member. Each Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, each Board is required to consider the continuation of the Advisory Agreement for its Trust, and with respect to BIT, the Sub-Advisory Agreement, on an annual basis. Each Board has four quarterly meetings per year, each typically extending for two days, and additional in-person and telephonic meetings throughout the year, as needed. Each Board also has a fifth one-day meeting to consider specific information surrounding the consideration of renewing the Agreement(s) for its Trust. Each Board’s consideration of the Agreement(s) for its Trust is a year-long deliberative process, during which the Board assessed, among other things, the nature, extent and quality of the services provided to its Trust by BlackRock, BlackRock’s personnel and affiliates, including, as applicable; investment management, accounting, administrative, and shareholder services; oversight of the Trust’s service providers; marketing; risk management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements.

Each Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement(s) for its Trust, including the services and support provided by BlackRock to the Trust and its shareholders. BlackRock also furnished additional information to each Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters each Board considered were: (a) investment performance for one-year, three-year, five-year, ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmarks, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analysis of the reasons for any over-performance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) leverage management, as applicable; (c) fees, including advisory, administration, if applicable, paid to BlackRock and its affiliates by the Trust for services; (d) Trust operating expenses and how BlackRock allocates expenses to the Trust; (e) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Trust’s investment objective(s), policies and restrictions, and meeting regulatory requirements; (f) the Trust’s adherence to its compliance policies and procedures; (g) the nature, character and scope of non-investment management services provided by BlackRock and its affiliates and the estimated cost of such services; (h) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (i) BlackRock’s implementation of the proxy voting policies approved by the Board; (j) execution quality of portfolio transactions; (k) BlackRock’s implementation of the Trust’s valuation and liquidity procedures; (l) an analysis of management fees for products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Trust; (m) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (n) periodic updates on BlackRock’s business.

The Board of each of BTZ and BGT considered BlackRock’s efforts during the past several years with regard to the redemption of outstanding auction rate preferred securities. Each of BTZ and BGT has redeemed all of its outstanding auction rate preferred securities.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April Meeting, each Board requested and received materials specifically relating to the Agreement(s) for its Trust. Each Board is continuously engaged in a process with its independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided to the Board of each Trust in connection with the April Meeting included, among other things: (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), based on Lipper classifications, regarding the Trust’s fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of the Trust’s as compared with a peer group of funds (“Performance Peers”) and other metrics, as applicable; (b) information on the composition of the Expense Peers and Performance Peers, and a description of the Broadridge’s methodology; (c) information on the estimated profits realized by BlackRock and its affiliates pursuant to the Trust’s Agreement(s) and a discussion of fall-out benefits to BlackRock and its affiliates; (d) a general analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as institutional accounts, sub-advised mutual funds, closed-end funds, and open-end funds, under similar investment mandates, as applicable; (e) review of non-management fees; (f) the existence and impact and sharing of potential economies of scale, if any, and the sharing of potential economies of scale with the Trust; (g) a summary of aggregate amounts paid by the Trust to BlackRock; and (h) various additional information requested by the Board as appropriate regarding BlackRock’s and the Trust’s operations.

 

 

108		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement  (continued)

 

At the April Meeting, each Board reviewed materials relating to its consideration of the Agreement(s) for its Trust. As a result of the discussions that occurred during the April Meeting, and as a culmination of each Board’s year-long deliberative process, each Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the June Meeting.

At the June Meeting, each Board considered, among other things: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Trust as compared with Performance Peers and other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with the Trust; (d) the Trust’s fees and expenses compared to Expense Peers; (e) the sharing of potential economies of scale; (f) fall-out benefits to BlackRock and its affiliates as a result of BlackRock’s relationship with the Trust; and (g) other factors deemed relevant by the Board Members.

Each Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, services related to the valuation and pricing of Trust portfolio holdings, and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. Each Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. Each Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: Each Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of its Trust. Throughout the year, each Board compared its Trust’s performance to the performance of a comparable group of closed-end funds, relevant benchmark, and performance metrics, as applicable. Each Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. Each Board also reviewed the materials provided by its Trust’s portfolio management team discussing the Trust’s performance and the Trust’s investment objective(s), strategies and outlook.

Each Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and its Trust’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. Each Board also considered BlackRock’s overall risk management program, including the continued efforts of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRock’s Risk & Quantitative Analysis Group. Each Board engaged in a review of BlackRock’s compensation structure with respect to its Trust’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, each Board considered the quality of the administrative and other non-investment advisory services provided to its Trust. BlackRock and its affiliates provide each Trust with certain administrative, shareholder, and other services (in addition to any such services provided to its Trust by third parties) and officers and other personnel as are necessary for the operations of the Trust. In particular, BlackRock and its affiliates provide each Trust with administrative services including, among others: (i) responsibility for disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Trust; (iii) oversight of daily accounting and pricing; (iv) responsibility for periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers including, among others, the Trust’s custodian, fund accountant, transfer agent, and auditor; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and (ix) performing administrative functions necessary for the operation of the Trust, such as tax reporting, expense management, fulfilling regulatory filing requirements, and shareholder call center and other services. Each Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Trusts and BlackRock: Each Board, including the Independent Board Members, also reviewed and considered the performance history of its Trust. In preparation for the April Meeting, the Board of each Trust was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of its Trust’s performance as of December 31, 2017. The performance information is based on net asset value (NAV), and utilizes Lipper data. Lipper’s methodology calculates a fund’s total return assuming distributions are reinvested on the ex-date at a fund’s ex-date NAV. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, each Board received and reviewed information regarding the investment performance of its Trust as compared to its Performance Peers and a custom peer group of funds as defined by BlackRock (“Customized Peer Group”). Each Board and its Performance Oversight Committee regularly review, and meet with Trust management to discuss, the performance of the Trust throughout the year.

In evaluating performance, each Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. Further, each Board recognized that it is possible that long-term performance can be impacted by even one period of significant outperformance or underperformance, so that a single investment theme has the ability to affect long-term performance disproportionately.

The Board of BTZ noted that for the one-, three- and five-year periods reported, BTZ ranked in the second, second and first quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for BTZ.

The Board of BGT noted that for the one-, three- and five-year periods reported, BGT ranked in the third, second and second quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for BGT. The Board and BlackRock reviewed the Trust’s underperformance during the applicable period.

The Board of BIT noted that for the one-year, three-year and since-inception periods reported, BIT ranked in the second, second and first quartiles, respectively, against its Customized Peer Group. BlackRock believes that the Customized Peer Group is an appropriate performance metric for BIT.

 

 

DISCLOSURE OF INVESTMENT ADVISORY AGREEMENTS AND SUB-ADVISORY AGREEMENT			109

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement  (continued)

 

C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with the Trusts: Each Board, including the Independent Board Members, reviewed its Trust’s contractual management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. Each Board also compared its Trust’s total expense ratio, as well as its actual management fee rate as a percentage of total assets, to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. Each Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).

Each Board received and reviewed statements relating to BlackRock’s financial condition. Each Board reviewed BlackRock’s profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to its Trust. Each Board reviewed BlackRock’s estimated profitability with respect to its Trust and other funds the Board currently oversees for the year ended December 31, 2017 compared to available aggregate estimated profitability data provided for the prior two years. Each Board reviewed BlackRock’s estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. Each Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. Each Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. As a result, calculating and comparing profitability at individual fund levels is difficult.

Each Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. Each Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. Each Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, each Board considered the estimated cost of the services provided to its Trust by BlackRock, and BlackRock’s and its affiliates’ estimated profits relating to the management of its Trust and the other funds advised by BlackRock and its affiliates. As part of its analysis, each Board reviewed BlackRock’s methodology in allocating its costs of managing its Trust, to the Trust. Each Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under its Trust’s Agreement(s) and to continue to provide the high quality of services that is expected by the Board. Each Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing its Trust in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable.

The Board of BTZ noted that BTZ’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio ranked in the fourth and second quartiles, respectively, relative to the Expense Peers. The Board also noted, however, that given the comparability limitations of the Expense Peers, BlackRock provided the Board a supplemental peer group consisting of funds that are generally similar to BTZ. The Board noted that BTZ’s actual management fee rate and total expense ratio each ranked in the third quartile, relative to the supplemental peer group.

The Board of BGT noted that the Trust’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile, relative to the Expense Peers.

The Board of BIT noted that the Trust’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio each ranked in the third quartile, relative to the Expense Peers. The Board also noted, however, that given the comparability limitations of the Expense Peers, BlackRock provided the Board a supplemental peer group consisting of funds that are generally similar to BIT. The Board noted that the Trust’s actual management fee rate and total expense ratio ranked in the second and third quartiles, respectively, relative to the supplemental peer group.

D. Economies of Scale: The Board of each Trust, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Trust increase. Each Board also considered the extent to which its Trust benefits from such economies in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Trust to more fully participate in these economies of scale. Each Board considered its Trust’s asset levels and whether the current fee was appropriate.

Based on each Board’s review and consideration of the issue, each Board concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception.

E. Other Factors Deemed Relevant by the Board Members: Each Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from BlackRock’s respective relationships with its Trust, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Trust, including for administrative, securities lending and cash management services. Each Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. Each Board also noted that, subject to applicable law, BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.

In connection with its consideration of the Agreement(s) for its Trust, each Board also received information regarding BlackRock’s brokerage and soft dollar practices. Each Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

Each Board noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Trust shares in the secondary market if they believe that the Trust’s fees and expenses are too high or if they are dissatisfied with the performance of the Trust.

 

 

110		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreement  (continued)

 

Each Board also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included the completion of the redemption of auction rate preferred securities for all of the BlackRock closed-end funds; developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; periodic evaluation of share repurchases and other support initiatives for certain BlackRock funds; and continued communications efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members of each Trust noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

Conclusion

Each Board, including the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Trust for a one-year term ending June 30, 2019. The Board of BIT, including the Independent Board Members, also unanimously approved the continuation of the Sub-Advisory Agreement between the Manager and the Sub-Advisor, with respect to the Trust, for a one-year term ending June 30, 2019. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, each Board, including the Independent Board Members, was satisfied that the terms of its Trust’s Agreement(s) were fair and reasonable and in the best interest of the Trust and its shareholders. In arriving at its decision to approve the Agreement(s), each Board did not identify any single factor or group of factors as, all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members of each Trust were also assisted by the advice of independent legal counsel in making this determination.

 

 

DISCLOSURE OF INVESTMENT ADVISORY AGREEMENTS AND SUB-ADVISORY AGREEMENT			111

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Automatic Dividend Reinvestment Plan

 

Pursuant to each Trust’s Dividend Reinvestment Plan (the “Reinvestment Plan”), Common Shareholders are automatically enrolled to have all distributions of dividends and capital gains and other distributions reinvested by Computershare Trust Company, N.A. (the “Reinvestment Plan Agent”) in the respective Trust’s Common Shares pursuant to the Reinvestment Plan. Shareholders who do not participate in the Reinvestment Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street name or other nominee name, then to the nominee) by the Reinvestment Plan Agent, which serves as agent for the shareholders in administering the Reinvestment Plan.

After the Trusts declare a dividend or determine to make a capital gain or other distribution, the Reinvestment Plan Agent will acquire shares for the participants’ accounts, depending upon the following circumstances, either (i) through receipt of unissued but authorized shares from the Trusts (“newly issued shares”) or (ii) by purchase of outstanding shares on the open market or on the Trust’s primary exchange (“open-market purchases”). If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market premium”), the Reinvestment Plan Agent will invest the dividend amount in newly issued shares acquired on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the dividend payment date, the dollar amount of the dividend will be divided by 95% of the market price on the dividend payment date. If, on the dividend payment date, the NAV is greater than the market price per share plus estimated brokerage commissions (such condition often referred to as a “market discount”), the Reinvestment Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases. If the Reinvestment Plan Agent is unable to invest the full dividend amount in open-market purchases, or if the market discount shifts to a market premium during the purchase period, the Reinvestment Plan Agent will invest any un-invested portion in newly issued shares. Investments in newly issued shares made in this manner would be made pursuant to the same process described above and the date of issue for such newly issued shares will substitute for the dividend payment date.

You may elect not to participate in the Reinvestment Plan and to receive all dividends in cash by contacting the Reinvestment Plan Agent, at the address set forth below.

Participation in the Reinvestment Plan is completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Reinvestment Plan Agent prior to the dividend record date. Additionally, the Reinvestment Plan Agent seeks to process notices received after the record date but prior to the payable date and such notices often will become effective by the payable date. Where late notices are not processed by the applicable payable date, such termination or resumption will be effective with respect to any subsequently declared dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment of distributions will be paid by each Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Reinvestment Plan Agent’s open-market purchases in connection with the reinvestment of all distributions. The automatic reinvestment of all distributions will not relieve participants of any U.S. federal, state or local income tax that may be payable on such dividends or distributions.

Each Trust reserves the right to amend or terminate the Reinvestment Plan. There is no direct service charge to participants in the Reinvestment Plan; however, each Trust reserves the right to amend the Reinvestment Plan to include a service charge payable by the participants. Participants that request a sale of shares are subject to a $2.50 sales fee and a $0.15 per share fee. Per share fees include any applicable brokerage commissions the Reinvestment Plan Agent is required to pay. All correspondence concerning the Reinvestment Plan should be directed to Computershare Trust Company, N.A. through the internet at http://www.computershare.com/blackrock, or in writing to Computershare, P.O. Box 505000, Louisville, KY 40233, Telephone: (800) 699-1236. Overnight correspondence should be directed to the Reinvestment Plan Agent at Computershare, 462 South 4^th Street, Suite 1600, Louisville, KY 40202.

 

 

112		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Trustee and Officer Information

 

Independent Trustees (a)
Name Year of Birth (b)		Position(s) Held (Length of Service) (c)		Principal Occupation(s) During Past Five Years		Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen (d)		Public Company and Other Investment Company Directorships Held During Past Five Years
Richard E. Cavanagh 1946		Chair of the Board and Trustee (Since 2007)		Director, The Guardian Life Insurance Company of America since 1998; Board Chair, Volunteers of America (a not-for-profit organization) from 2015 to 2018 (board member since 2009); Director, Arch Chemical (chemical and allied products) from 1999 to 2011; Trustee, Educational Testing Service from 1997 to 2009 and Chairman thereof from 2005 to 2009; Senior Advisor, The Fremont Group since 2008 and Director thereof since 1996; Faculty Member/Adjunct Lecturer, Harvard University since 2007 and Executive Dean from 1987 to 1995; President and Chief Executive Officer, The Conference Board, Inc. (global business research organization) from 1995 to 2007.		73 RICs consisting of 73 Portfolios		None
Karen P. Robards 1950		Vice Chair of the Board and Trustee (Since 2007)		Principal of Robards & Company, LLC (consulting and private investing) since 1987; Co-founder and Director of the Cooke Center for Learning and Development (a not-for-profit organization) since 1987; Investment Banker at Morgan Stanley from 1976 to 1987.		73 RICs consisting of 73 Portfolios		Greenhill & Co., Inc.; AtriCure, Inc. (medical devices) from 2000 until 2017
Michael J. Castellano 1946		Trustee (Since 2011)		Chief Financial Officer of Lazard Group LLC from 2001 to 2011; Chief Financial Officer of Lazard Ltd from 2004 to 2011; Director, Support Our Aging Religious (non-profit) from 2009 to June 2015 and since 2017; Director, National Advisory Board of Church Management at Villanova University since 2010; Trustee, Domestic Church Media Foundation since 2012; Director, CircleBlack Inc. (financial technology company) since 2015.		73 RICs consisting of 73 Portfolios		None
Cynthia L. Egan 1955		Trustee (Since 2016)		Advisor, U.S. Department of the Treasury from 2014 to 2015; President, Retirement Plan Services for T. Rowe Price Group, Inc. from 2007 to 2012; executive positions within Fidelity Investments from 1989 to 2007.		73 RICs consisting of 73 Portfolios		Unum (insurance); The Hanover Insurance Group (insurance); Envestnet (investment platform) from 2013 until 2016
Frank J. Fabozzi 1948		Trustee (Since 2007)		Editor of The Journal of Portfolio Management since 1986; Professor of Finance, EDHEC Business School (France) since 2011; Visiting Professor, Princeton University for the 2013 to 2014 academic year and Spring 2017 semester; Professor in the Practice of Finance, Yale University School of Management from 1994 to 2011 and currently a Teaching Fellow in Yale’s Executive Programs; affiliated professor Karlsruhe Institute of Technology from 2008 to 2011.		73 RICs consisting of 73 Portfolios		None
R. Glenn Hubbard 1958		Trustee (Since 2007)		Dean, Columbia Business School since 2004; Faculty member, Columbia Business School since 1988.		73 RICs consisting of 73 Portfolios		ADP (data and information services); Metropolitan Life Insurance Company (insurance); KKR Financial Corporation (finance) from 2004 until 2014
W. Carl Kester 1951		Trustee (Since 2007)		George Fisher Baker Jr. Professor of Business Administration, Harvard Business School since 2008, Deputy Dean for Academic Affairs from 2006 to 2010, Chairman of the Finance Unit, from 2005 to 2006, Senior Associate Dean and Chairman of the MBA Program from 1999 to 2005; Member of the faculty of Harvard Business School since 1981.		73 RICs consisting of 73 Portfolios		None

 

 

TRUSTEE AND OFFICER INFORMATION			113

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Trustee and Officer Information  (continued)

 

Independent Trustees (a) (continued)
Name Year of Birth (b)		Position(s) Held (Length of Service) (c)		Principal Occupation(s) During Past Five Years		Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen (d)		Public Company and Other Investment Company Directorships Held During Past Five Years
Catherine A. Lynch 1961		Trustee (Since 2016)		Chief Executive Officer, Chief Investment Officer and various other positions, National Railroad Retirement Investment Trust from 2003 to 2016; Associate Vice President for Treasury Management, The George Washington University from 1999 to 2003; Assistant Treasurer, Episcopal Church of America from 1995 to 1999.		73 RICs consisting of 73 Portfolios		None
Interested Trustees (a)(e)
Name Year of Birth (b)		Position(s) Held (Length of Service) (c)		Principal Occupation(s) During Past Five Years		Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen (d)		Public Company and Investment Company Directorships Held During Past Five Years
Robert Fairbairn 1965		Trustee (Since 2018)		Senior Managing Director of BlackRock, Inc. since 2010; oversees BlackRock’s Strategic Partner Program and Strategic Product Management Group; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock’s Human Capital Committee; Member of the Board of Managers of BlackRock Investments, LLC since 2011; Global Head of BlackRock’s Retail and iShares® businesses from 2012 to 2016.		133 RICs consisting of 309 Portfolios		None
John M. Perlowski 1964		Trustee (Since 2015); President and Chief Executive Officer (Since 2010)		Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009.		133 RICs consisting of 309 Portfolios		None
(a) The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
(b) Each Independent Trustee will serve until his or her successor is elected and qualifies, or until his or her earlier death, resignation, retirement or removal, or until December 31 of the year in which he or she turns 75. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon finding of good cause therefor.
(c) Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Independent Trustees as joining the Board in 2007, each Trustee first became a member of the boards of other legacy MLIM or legacy BlackRock funds as follows: Richard E. Cavanagh, 1994; Frank J. Fabozzi, 1988; R. Glenn Hubbard, 2004; W. Carl Kester, 1995 and Karen P. Robards, 1998.
(d) For purposes of this chart, “RICs” refers to investment companies registered under the 1940 Act and “Portfolios” refers to the investment programs of the BlackRock-advised funds. The Closed-End Complex is comprised of 73 RICs consisting of 73 Portfolios. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex.
(e) Mr. Fairbairn and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Equity-Bond Complex and the BlackRock Equity-Liquidity Complex. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The maximum age limitation may be waived as to any Trustee by action of a majority of the Trustees upon a finding of good cause therefor.

 

 

114		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Trustee and Officer Information  (continued)

 

Officers Who Are Not Trustees (a)
Name Year of Birth (b)		Position(s) Held (Length of Service)		Principal Occupation(s) During Past Five Years
Jonathan Diorio 1980		Vice President (Since 2015)		Managing Director of BlackRock, Inc. since 2015; Director of BlackRock, Inc. from 2011 to 2015.
Neal J. Andrews 1966		Chief Financial Officer (Since 2007)		Managing Director of BlackRock, Inc. since 2006.
Jay M. Fife 1970		Treasurer (Since 2007)		Managing Director of BlackRock, Inc. since 2007.
Charles Park 1967		Chief Compliance Officer (Since 2014)		Anti-Money Laundering Compliance Officer for the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the Equity-Bond Complex, the Equity-Liquidity Complex and the Closed-End Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012.
Janey Ahn 1975		Secretary (Since 2012)		Managing Director of BlackRock, Inc. since 2018; Director of BlackRock, Inc. from 2009 to 2017.
(a) The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
(b) Officers of the Trust serve at the pleasure of the Board.

 

 

 

 

(a)

For BIT.

 

 

TRUSTEE AND OFFICER INFORMATION			115

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Additional Information

 

Proxy Results

The Annual Meeting of Shareholders was held on July 30, 2018 for shareholders of record on May 31, 2018, to elect trustee nominees for each Trust. There were no broker non-votes with regard to any of the Trusts.

Shareholders elected the Class II Trustees & Class III Trustee as follows:

 

		Frank J. Fabozzi (a)								Robert Fairbairn (b)								Catherine A. Lynch (a)								Karen P. Robards (a)
		Votes For				Votes Withheld				Votes For				Votes Withheld				Votes For				Votes Withheld				Votes For				Votes Withheld
BTZ			94,340,171				6,818,180				96,200,439				4,957,912				96,352,248				4,806,103				96,332,330				4,826,021
BGT			21,284,832				569,080				21,389,760				464,152				21,387,951				465,961				21,369,081				484,831
BIT			34,083,702				540,842				34,091,758				532,786				34,076,133				548,411				34,068,920				555,624

 

(a)

Class II Trustee.

(b)

Class III Trustee.

For the Trusts listed above, Trustees whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are Michael J. Castellano, Richard E. Cavanagh, Cynthia L. Egan, R. Glenn Hubbard, John M. Perlowski and W. Carl Kester.

Trust Certification

The Trusts are listed for trading on the NYSE and has filed with the NYSE its annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Trusts filed with the SEC the certification of their chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

Dividend Policy

Each Trust’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, the distributions paid by the Trusts for any particular month may be more or less than the amount of net investment income earned by the Trusts during such month. The portion of distributions that exceeds a Trust’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a Trust’s taxable income and net capital gains, but not in excess of a Trust’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. The Trusts’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.

General Information

The Trusts do not make available copies of their Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statement of Additional Information of each Trust has not been updated after completion of the respective Trust’s offerings and the information contained in each Trust’s Statement of Additional Information may have become outdated.

During the period there were no material changes in the Trusts’ investment objectives or policies or to the Trusts’ charter or by-laws that would delay or prevent a change of control of the Trusts that were not approved by the shareholders or in the principal risk factors associated with investment in the Trusts. Except as disclosed on page 115, there have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios.

In accordance with Section 23(c) of the Investment Company Act of 1940, each Trust may from time to time purchase shares of its common shares in open market or in private transactions.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Trusts may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.

Electronic Delivery

Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual shareholder reports by enrolling in the electronic delivery program. Electronic copies of shareholder reports are available on BlackRock’s website.

To enroll in electronic delivery:

Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:

Please contact your financial adviser. Please note that not all investment advisers, banks or brokerages may offer this service.

Householding

The Trusts will mail only one copy of shareholder documents, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Trusts at (800) 882-0052.

 

 

116		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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Additional Information  (continued)

 

Availability of Quarterly Schedule of Investments

The Trusts file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trusts’ Forms N-Q are available on the SEC’s website at http://www.sec.gov. The Trusts’ Forms N-Q may also be obtained upon request and without charge by calling (800) 882-0052.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Trusts use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 882-0052; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Trusts voted proxies relating to securities held in the Trusts’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 882-0052 and (2) on the SEC’s website at http://www.sec.gov.

Availability of Trust Updates

BlackRock will update performance and certain other data for the Trusts on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Trusts. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended to, incorporate BlackRock’s website in this report.

Section 19(a) Notices

The amounts and sources of distributions reported in this notice are for financial reporting purposes and are not being provided for tax reporting purposes. The actual amounts and character of the distributions for tax reporting purposes will be reported to shareholders on Form 1099-DIV which is sent to shareholders shortly after calendar year end.

October 31, 2018

 

		Total Fiscal Year to Date Cumulative Distributions by Character																				Percentage of Fiscal Year to Date Cumulative Distributions by Character
Ticker		Net Investment Income				Net Realized Capital Gains Short Term				Net Realized Capital Gains Long Term				Return of Capital				Total Per Common Share				Net Investment Income				Net Realized Capital Gains Short Term				Net Realized Capital Gains Long Term				Return of Capital				Total Per Common Share
BTZ		$	0.804000				—				—				—			$	0.804000				100	%			0	%			0	%			0	%			100	%
BIT			1.531405				—				—				—				1.531405				100				0				0				0				100

The Trusts estimate that they have distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in the Trusts are returned to the shareholder. A return of capital does not necessarily reflect the Trusts’ investment performance and should not be confused with ‘yield’ or ‘income.’ When distributions exceed total return performance, the difference will reduce the Trusts’ NAV per share.

Section 19(a) notices for the Trusts, as applicable, are available on the BlackRock website at http://www.blackrock.com.

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

 

 

ADDITIONAL INFORMATION			117

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Glossary of Terms Used in this Report

 

 

 

118		2018 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS

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This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Trusts have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

 

CE-CAFRI-3-10/18-AR

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Item 2 –

Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, who calls 1-800-882-0052, option 4.

 

Item 3 –

Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:

Michael Castellano

Frank J. Fabozzi

Catherine A. Lynch

Karen P. Robards

The registrant’s board of directors has determined that Karen P. Robards qualifies as a financial experts pursuant to Item 3(c)(4) of Form N-CSR.

Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization.

Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.

 

Item 4 –

Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

 

(a) Audit Fees

(b) Audit-Related Fees1

(c) Tax Fees2

(d) All Other Fees

Entity Name

Current

Previous

Current

Previous

Current

Previous

Current

Previous

 

2

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		Fiscal Year   End		Fiscal Year   End		Fiscal Year   End		Fiscal Year   End		Fiscal Year   End		Fiscal Year   End		Fiscal Year   End		Fiscal Year   End
BlackRock Floating Rate Income Trust		$72,828		$72,841		$0		$0		$14,500		$14,484		$0		$0

The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors LLC ( the “Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):

 

		Current Fiscal Year End		Previous Fiscal Year End
(b) Audit-Related Fees1		$0		$0
(c) Tax Fees2		$0		$0
(d) All Other Fees3		$2,274,000		$2,129,000

¹ The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.

² The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.

³ Non-audit fees of $2,274,000 and $2,129,000 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any

 

3

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specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:

 

		Entity Name		Current Fiscal Year       End		Previous Fiscal Year       End
		BlackRock Floating Rate Income Trust		$14,500		$14,484

Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored or advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:

 

Current Fiscal Year End		Previous Fiscal Year End
$2,274,000		$2,129,000

These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser, and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5 –

Audit Committee of Listed Registrants

 

(a)

The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):

Michael Castellano

Frank J. Fabozzi

Catherine A. Lynch

Karen P. Robards

 

(b)

Not Applicable

 

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Item 6 –

Investments

(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.

(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

 

Item 7 –

Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – The board of directors has delegated the voting of proxies for the Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the Investment Adviser, on the other. In such event, provided that the Investment Adviser’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if the Oversight Committee does not reasonably believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s clients. If the Investment Adviser determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio Management Group and/or the Investment Adviser’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.

 

Item 8 –

Portfolio Managers of Closed-End Management Investment Companies

.(a)(1) As of the date of filing this Report:

The registrant is managed by a team of investment professionals comprised of Joshua Tarnow, Managing Director at BlackRock, James E. Keenan, Managing Director at BlackRock, David Delbos, Managing Director at BlackRock, Mitchell S. Garfin, Managing Director at BlackRock, Carly Wilson, Director at BlackRock and Abigail Apistolas, Associate at Blackrock.. Messrs. Tarnow, Keenan, Delbos and Garfin and Mses. Wilson and Apistolas are the Fund’s co-portfolio managers and are responsible for the day-to-day management of the Fund’s portfolio and the selection of its investments. Messrs. Keenan and Tarnow have been members of the Fund’s management team since 2007 and 2016, respectively. Messrs. Delbos and Garfin and Mses. Wilson and Apistolas became portfolio managers to the Fund on August 31, 2018.

 

 

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(a)(2) As of October 31, 2018:

 

(iv)   Portfolio Manager Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in

 

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the receipt of such fees), which may be the same as or different from those made to the Fund. In addition, BlackRock, Inc., its affiliates and significant shareholders and any officer, director, shareholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, Inc., or any of its affiliates or significant shareholders, or any officer, director, shareholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock, Inc.’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock, Inc. or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Certain portfolio managers also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. It should also be noted that Messrs. Tarnow, Keenan, Delbos and Garfin and Mses. Wilson and Apistolas may be managing hedge fund and/or long only accounts, or may be part of a team managing hedge fund and/or long only accounts, subject to incentive fees. Messrs. Tarnow, Keenan, Delbos and Garfin and Mses. Wilson and Apistolas may therefore be entitled to receive a portion of any incentive fees earned on such accounts.

As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock, Inc. has adopted policies that are intended to ensure reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base, as appropriate.

(a)(3) As of October 31, 2018:

Portfolio Manager Compensation Overview

The discussion below describes the portfolio managers’ compensation as of October 31, 2018.

BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock.

Base Compensation. Generally, portfolio managers receive base compensation based on their position with the firm.

Discretionary Incentive Compensation

Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the

 

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investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s performance and contribution to the overall performance of these portfolios and BlackRock. In most cases, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Funds or other accounts managed by the portfolio managers are measured. Among other things, BlackRock’s Chief Investment Officers make a subjective determination with respect to each portfolio manager’s compensation based on the performance of the funds and other accounts managed by each portfolio manager relative to the various benchmarks. Performance of fixed income funds is measured on a pre-tax and/or after-tax basis over various time periods including 1-, 3- and 5- year periods, as applicable. With respect to these portfolio managers, such benchmarks for the Fund and other accounts are:

 

Portfolio Manager		Benchmark
James Keenan David Delbos Mitchell S. Garfin		A combination of market-based indices (e.g., The Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index), certain customized indices and certain fund industry peer groups.
Joshua Tarnow Carly Wilson		A combination of market-based indices (e.g. Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index).
Abigail Apistolas		A combination of market-based indices (e.g., S&P Leveraged All Loan Index), certain customized indices and certain fund industry peer groups.

Distribution of Discretionary Incentive Compensation. Discretionary incentive compensation is distributed to portfolio managers in a combination of cash, deferred BlackRock, Inc. stock awards, and/or deferred cash awards that notionally track the return of certain BlackRock investment products.

Portfolio managers receive their annual discretionary incentive compensation in the form of cash. Portfolio managers whose total compensation is above a specified threshold also receive deferred BlackRock, Inc. stock awards annually as part of their discretionary incentive compensation. Paying a portion of discretionary incentive compensation in the form of deferred BlackRock, Inc. stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods. In some cases, additional deferred BlackRock, Inc. stock may be granted to certain key employees as part of a long-term incentive award to aid in retention, align interests with long-term shareholders and motivate performance. Deferred BlackRock, Inc. stock awards are generally granted in the form of BlackRock, Inc. restricted stock units that vest pursuant to the terms of the applicable plan and, once vested, settle in BlackRock, Inc. common stock. The portfolio managers of this Fund have deferred BlackRock, Inc. stock awards.

For certain portfolio managers, a portion of the discretionary incentive compensation is also distributed in the form of deferred cash awards that notionally track the returns of select BlackRock investment products they manage, which provides direct alignment of portfolio manager discretionary incentive compensation with investment product results. Deferred cash awards vest ratably over a number of years and, once vested, settle in the form of cash. Only portfolio managers who manage specified products and whose total compensation is above a specified threshold are eligible to participate in the deferred cash award program.

 

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Other Compensation Benefits. In addition to base salary and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:

Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock, Inc. employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 8% of eligible pay contributed to the plan capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation up to the Internal Revenue Service limit ($275,000 for 2018). The RSP offers a range of investment options, including registered investment companies and collective investment funds managed by the firm. BlackRock, Inc. contributions follow the investment direction set by participants for their own contributions or, absent participant investment direction, are invested into a target date fund that corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares of common stock or a dollar value of $25,000 based on its fair market value on the purchase date. All of the eligible portfolio managers are eligible to participate in these plans.

(a)(4) Beneficial Ownership of Securities – As of October 31, 2018.

 

		Portfolio Manager				Dollar Range of Equity Securities       of the Fund Beneficially Owned
		Joshua Tarnow				None
		James E. Keenan				$100,001 - $500,000
		David Delbos				None
		Mitchell S. Garfin				None
		Carly Wilson				None
		Abigail Apistolas				None

(b) Not Applicable

 

Item 9 –

Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

 

 

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¹On September 6, 2017, the Fund announced a continuation of the open market share repurchase program, pursuant to which the Fund may repurchase through November 30, 2018 up to 5% of its outstanding shares based on common shares outstanding on November 30, 2017, in open market transactions. On September 7, 2018, the Fund announced a further continuation of its open market share repurchase program. Commencing on December 1, 2018, the Fund may repurchase through November 30, 2019, up to 5% of its common shares outstanding as of the close of business on November 30, 2018, subject to certain conditions.

 

Item 10 –

Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

 

Item 11 –

Controls and Procedures

(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 12 –

Disclosure of Securities Lending Activities for Closed-End Management Investment Companies

(a) The following table shows the dollar amounts of income, and dollar amounts of fees and/or compensation paid, relating to the Fund’s securities lending activities during the fiscal year ended October 31, 2018. The Fund did not engage in any securities lending activity during the fiscal year ended October 31, 2018.

 

		BlackRock Floating Rate Income Trust
(1)		Gross income from securities lending activities					$0
(2)		Fees and/or compensation for securities lending activities and related services
		(a)		Securities lending income paid to BIM for services as securities lending agent			$0
		(b)		Collateral management expenses (including fees deducted from a polled cash collateral vehicle) not included in (a)			$0
		(c)		Administrative fees not included in (a)			$0
		(d)		Indemnification fees not included in (a)			$0
		(e)		Rebate (paid to borrowers)			$0
		(f)		Other fees not included in (a)			$0
(3)		Aggregate fees/compensation for securities lending activities					$0
(4)		Net income from securities lending activities					$0

(b) BlackRock Investment Management, LLC (“BIM”) serves as securities lending agent for the Fund and in that role administers the Fund’s securities lending program pursuant to the terms of a securities lending agency agreement entered into between the Fund and BIM.

 

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Item 13 –

Exhibits attached hereto

(a)(1) – Code of Ethics – See Item 2

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(a)(4) – Not Applicable

(b) – Certifications – Attached hereto

 

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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		BlackRock Floating Rate Income Trust
		By:		/s/ John M. Perlowski
				John M. Perlowski
				Chief Executive Officer (principal executive officer) of
				BlackRock Floating Rate Income Trust
		Date: January 4, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

		By:		/s/ John M. Perlowski
				John M. Perlowski
				Chief Executive Officer (principal executive officer) of
				BlackRock Floating Rate Income Trust
		Date: January 4, 2019
		By:		/s/ Neal J. Andrews
				Neal J. Andrews
				Chief Financial Officer (principal financial officer) of
				BlackRock Floating Rate Income Trust
		Date: January 4, 2019